America Hunkers Down: A Nation of Savers?

Rozanne Weissman doesn't fear for her job but has cut back on expenses anyway. She hasn't gotten her hair cut since it was short, for example. (By Juana Arias For The Washington Post)

Silver Spring retirees Carol and John Warner are among those who have been forced to cut back. The couple, ages 80 and 83, live on a mix of savings, investment income and annuities. After their health insurance costs rose, they skipped their annual trip to an art colony in Wisconsin and regular visits with three of their four children, who live out of state.

To cut their grocery bill, they said, they've cut out bacon and rely on a bumper crop of tomatoes and beans from their vegetable garden to make more soups. On a recent trip to the grocery store, John Warner had a clerk separate a single leek so he wouldn't have to buy the entire bunch. The couple have also reduced some of their long-term health-care-coverage options.

"We really didn't have a savings strategy before," Carol Warner said. "We had a lot more of a social life. We did a lot more entertaining. . . . We don't do that much anymore."

With the savings rate expected to rise further, some forecasters are heralding a new economy in which Americans continue to hang on to more of their cash and consumer spending, which currently accounts for 70 percent of economic output, plays a smaller role in driving economic growth. That scenario is all the more likely as more baby boomers retire; soon-to-be-retirees tend to be the most aggressive savers.

But Massimo Guidolin, an economist at the Federal Reserve Bank of St. Louis, said there is not enough data to say whether there has been a shift in consumer behavior. The savings rate does not capture whether people are being forced to save because of credit constraints or other financial exigencies or if they are intentionally saving.

Rozanne Weissman, a District resident, falls into the latter category. She said she's not in danger of losing her job, with a local nonprofit that focuses on reducing energy use. She has no problems paying the mortgage on her West End condo, which she's owned since 1985. Until now, she's felt few if any direct consequences of the recession.

And yet she has stopped going to the movies unless she can get free tickets. She no longer buys clothes and is boycotting hair salons until the economy improves. Her normally short auburn hair is down to her shoulders. Doing so has allowed her to sock away an extra $200 a month.

"I think, like many people, I've looked at what I am doing. What can I cut? What should I cut?" she said. "What won't I cut as long as I'm working? Everyone has to make their own decisions."