Life-Cycle Saving as a Source of Wealth

While most people scrimp and save to put away a few for their retirement, such thrift is probably the major source of wealth in the United States. e difficulty of accumulating a large fortune by save out of normal labor earnings can be illustrated . g a realistic example. Suppose that the average class family saved about·$2000 annually (5 percent o’its income) for 20 years. Further suppose that through prudent investments it managed to obtain a real return after taxes of 5 percent each year. At the end of the period, total accumulated wealth would be $73,200-a sum equal. to only one-quarter of average family net worth

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