Quick! Guess what our national savings rate is these days. You might know that we're often advised to put aside 10% or more of our income each year, to build a nest egg for retirement. And you might (correctly) assume that on average, Americans don't save nearly that much. But just how badly are we doing? Well, consider these historical numbers for the U.S. personal savings rate:

  • 1984: 10.8%
  • 2001: 1.8%
  • 2003: 1.4%

Do you see a troubling trend? So do I. Care to guess where we landed in 2005?

  • 2005: (0.5%)

That's right -- negative savings!

Is that unprecedented? Well, not exactly. We hit negative levels for two years -- during the Great Depression.

In a nutshell
Let's back up a bit, though. You need to know that this savings rate represents the percentage of real GDP (gross domestic product, the total value of goods and services produced in America) saved by households within a year. A positive rate suggests that Americans earned more than they spent, while a negative rate reflects people consuming more than they earn, perhaps by spending down their savings or by borrowing money (think home equity loans or credit cards).

This is obviously a troubling trend. In general, most Americans are woefully behind schedule when it comes to savings. We need to have long-term savings to support ourselves in retirement, and we need short-term savings, too, to protect us in case the not-so-unthinkable happens (such as a job loss or medical emergency).

Consider these data points:

  • Social Security isn't so secure, and we shouldn't count on it for any guaranteed income in our golden years. It will probably be there in some form, but the future is unclear.
  • A study published in 2005 in Health Affairs reported that roughly half of the Americans who file for bankruptcy do so primarily because of medical expenses they can't afford. Literally millions of people have ended up in bankruptcy because of this -- and other factors, such as unexpected job loss -- and not because of irresponsible spending.
  • Fully 28% percent of all American adults are not participating in any retirement plan, according to the A.G. Edwards Nest Egg Score study. This includes 25% of those aged 40 to 49, 22% of those aged 50 to 64, and 24% of those 65 and older. Yikes!

How about you?
Think about what you've socked away for retirement. Then grab a calculator. Let's say you have $60,000 saved. (If so, you're far ahead of most people -- congratulations!) Let's say you'll be leaving it invested in stocks to grow for 20 years. Let's say you earn an annual average return of 10% per year. Here's how to crunch these numbers so you can substitute your own numbers in the exercise: Take 1.10 (representing the 10% growth; it would be 1.09 for 9% growth) and raise it to the 20th power. I get 6.73. That's how much your money will grow by. Multiply that by your nest egg of $60,000 and you'll get $403,650, which is how much you'll end up with in 20 years.

[Note that you can get these market-average returns by simply investing in a broad-market index fund, such as one based on the S&P 500. Such funds typically have low fees and will instantly have you invested in 500 companies, such as General Electric (NYSE:GE) and Moody's (NYSE:MCO).]

So accumulating that $403,650 might look good, but will it be enough to live on? If not, it means you need to get cracking improving your retirement planning and investing. Let us help you with that via our Rule Your Retirement newsletter service. You can, and should, try it for free for a whole month. Doing so will give you access to all the past issues, which feature a host of "Success Stories" profiling people who retired early and are willing to share their strategies. (It'll cost you nothing, there's no obligation to subscribe, and I'm pretty sure you'll like what you see.)

Meanwhile, don't ignore your short-term savings, either. It's dangerous to put all of your savings in stocks, because over the short run, they can slump severely, and you don't want that to happen just when you need to sell to pay for Junior's freshman year of college or for some unexpected surgery. Imagine if you had much of your nest egg in IBM (NYSE:IBM), which was above $120 in early 2002 and had fallen by more than 50% before the year was out (and it's still not above that high mark).

Learn how to make the most of your savings in our Savings Center, which features lots of critical information and helpful hints.

The nation's saving rate might be embarrassing, but yours doesn't have to be.

Moody's is a Motley Fool Stock Advisor recommendation.

Longtime Fool contributor Selena Maranjian owns shares of no company mentioned herein. Her favorite discussion boards include Book Club, Eclectic Library, Television Banter, and Card & Board Games. For more about Selena, view her bio and her profile. The Motley Fool is Fools writing for Fools.