Why I’m Hoarding My Cash

Why I'm Hoarding My Cash

A new survey out recently finds that 1 percenters are “hoarding three times as much cash as they were two years ago.”  Being a 1 percenter, I am not immune to this trend. The data in the survey show that the savings rate of the 1 percent have soared to 34 percent in the second quarter of 2012, up from 12 percent in 2007.  They’re investing just 44 percent in financial markets – down from 76 percent in 2007.

Since I track pretty much everything, I was able to look up this data for myself. Every year, we create a budget.  We determine what we will spend on housing, cars, entertainment, insurance, childcare, etc. In 2008, our savings rate was 22 percent (though we were not 1 percenters at that time). However, in 2012, our savings rate has jumped to 56 percent (does not include 401k and other retirement).

One could look at this data and presume that the reason for the high savings rate is because as we increased our income, we did expand our lifestyle to match the income. This is true to a degree, but we are cautious about the future.

Tax rates could rise an additional 4-5 percentage points at the federal level. I’m not sure what effect Obamacare taxes will have on our future. A 3.8% tax increase is built into Obama care on unearned income over $250k, there are additional payroll taxes on incomes above $250k. Employers are beginning to pass more healthcare costs to the employee. Businesses are beginning to pass on Obamacare healthcare costs to the consumer (see Papa John’s and McDonald’s).

All this uncertainty are reasons why our saving rate has gone up.  We are taking a “no loss” position rather than a “real gains” position due to uncertainty of the future.  We’re hedging our bets.  You can see from our investments, that we have an unusually large amount in cash.

Of course, this hoarding is the very reason why some say that 1 percenters should be taxed more. Rather than improve confidence in the economy, some feel that taking this money and wringing it through Washington D.C is more efficient.

Though, this could create some jobs, it is temporary, not sustainable, and hardly a plan for the future of this country. Spending has always been a part of the story of the 1 percent and according to the report, the lack of spending can have real implications on the economy.

About The Author

Edwin is a marketer, social media influencer and head writer here at I Am 1 Percent. He manages a large network of high quality finance blogs and social media accounts. You can connect with him via email here.


  1. RichUncle EL

    Wow 56% not including the 401K thats impressive.

    1. iam1percent

      Thanks for the compliment. Honestly, it gets easier if you are able to control spending as your income increases.

  2. Joe Morgan

    Gotta love the media… from 2000-2008 the ran stories about the low and eventual negative savings rate of Americans. Now that Americans are saving again, they’re “hoarding” money!

    I’m nowhere near being a “1%-er”, but I’m “hoarding” my cash too – and for the same reasons you are. Who knows what the tax landscape will be in 2013, and whether Obamacare will remain or be repealed?

    Of course, there’s always unknowable’s like when the next recession will be, but the clowns in Washington DC have been playing politics with taxes so long no one knows what the future holds, and that’s the real problem.

  3. Shape

    I have read some recent articles about how the stock market is dead and won’t continue to rise. So many people depend on the market for their investments, especially through 401k’s and IRA’s. I often wonder if it is even reasonable to assume that the market could even keep up the pace it has over the past few decades.

    I did read an article talking about how the dow jones has always had a cycle of bull / bear market. You can see it if you find a long chart (100 years) and look. We might be in for a bear market for awhile. I guess buy cheap and wait for the bull?

    I took a look at the yahoo article you posted. The “you didn’t build it” Romney thing continues to annoy me. Romney, you are better than using a miss quote as a big part of your campaign! It is one of those intellectually-dishonest things I hate.

    1. iam1percent

      I can’t figure out the markets. I continue to buy (via retirement vehicles) and have not pulled my retirement out of stocks just yet. Though risky, I am hedging those bets with cash.

  4. PK

    The 3.8% increase is one thing, but if the so-called “Bush Tax Cuts” expire, you’re looking at:

    1) Dividends no longer treated like capital gains

    2) Marginal rates increasing

    So, yeah… you may want to “tax gain harvest” near the end of the year and reinvest to change your cost basis, haha. I’ll definitely be writing more on that concept as we get closer to the deadline.

  5. Sam

    I’ve gone John Galt myself and plan to drastically reduce my taxes.

    Cash is great. Income producing assets are better.

    1. Investor Junkie

      I can’t believe you’ve really “Gone Galt”. IMHO if I was you I would have waited at least to 2013.

  6. Ornella @ Moneylicious

    56% saving is awesome~wow! It’s good that you are preparing yourself or at least positioning yourself to be in a good financial position to weather ups-n-down in any cyclical economy.

  7. [email protected]&More

    Congrats on not living so extravagantly so that you can save so much. Once the future outlook is more stable hopefully you can invest and spend more comfortably.

  8. Investor Junkie

    “Of course, this hoarding is the very reason why some say that 1 percenters should be taxed more. ”

    It’s because of their dumb economic policies and the economy itself. If you want people to spend and invest, make it positive to do so. Not bash them and make statements like “you didn’t build that”.

    In the end it’s my money and I will choose how to use it. By taxing me more, makes me want to use my cash less.

    1. Shape

      Investor Junkie

      You do realize that “you didn’t build that” is a blatant misquote? Maybe go actually watch the entire speech.

      Man, I love not being democrat or republican. So much comedy for me at election times.

      1. Shape

        Especially when people make life choices based on false fears. Met a guy in his 60s that was going to retire in 2010, but didn’t because Obamacare passed. What? You only have to gain from that law if you are retired.

        1. Investor Junkie

          You my friend have way too much faith in government to do the “right thing”. History shows otherwise.

          1. Shape

            No, it is about not living my life in constant paranoia. You never know what the government will do, and it doesn’t matter who controls it. The other day I heard someone say if Obama is reelected, then the first thing he will do is declare Martial Law… WHAT? Where are you finding this?

            Another person said Obama wants to take away assault rifles. Guess what… Romney said, “Assault weapons are not used for hunting or sport. Assault weapons are designed and only good for one thing, killing people.” AND he signed an assault weapon ban.

            Plus, I continually hear how people are upset at Obamacare, but they know so little about it. I mean, Romney put the same thing in his state. Take off the blinders. From The Daily Beast “Both programs create exchanges where private insurers compete. Both require individuals to purchase insurance. And both subsidize those who can’t afford it.”


            Romney’s mandate has a penalty of $1,200 vs Obama’s $695.

            Romney’s requires companies with 11 or more employees to provide insurance or pay $295 per employee penalty. Obama’s requires companies with 50 or more employees to provide insurance or pay a $2,000 per employee fee. Romney’s plan affects magnitudes more small businesses than Obamacare!

          2. Investor Junkie

            Shape, Did I ever state any of the things you bring up? While it’s fine you bring up the misinformation (which is on both sides), keep to the facts.

            Romneycare is slightly different than Obamacare in that it was done at the state level. Meaning if you did not like it you can move out of that state. If you can’t with Obamacare. The problem with any government program is it’s painted with one big broad stroke. Individual choices start to disappear.

            Let me give you one great example for me personally. My wife’s HC plan with her company is great. In fact they currently they offer 4 different companies as your HC choice.

            Guess what? Obama’s statement “You’ll keep your plan” is a lie. Why? because the company is only going to offer one plan next year, and we are losing the one we currently are under. How is that great for choice? We may have to chance a few doctors because of this change. It’s not known yet which of our Drs will be under this new HC company.

            In addition, Obamacare does not deal with ever increasing costs which is the bigger issue. Coverage isn’t the real issue for most. The bigger issue our country faces is every increasing HC costs.

            Obamacare will decrease the quality of care (how can it increase the quality when it adds 20-30M more people yet keep the same infrastructure?)

            I agree real details need to be discussed as adults on both sides. Instead of calling Paul Ryan’s plans as “radical” and throwing grandma off the cliff. If anything they are moderate.

            All I know the current path (Obamacare included) is not sustainable.

          3. Shape

            I agree that the increasing cost in HC is the real concern; one that is already out of hand. Medical bankruptcy is a real problem too. Another problem I have encountered recently with specialists is ones that don’t even take insurance so they can charge more money. This problem is just going to get worse.

            I don’t believe continuing to deny the 20-30 million people affordable insurance because the healthcare system need to expand is a good excuse though. Providing health insurance will help Americans to secure their right to life. The system will need to respond. There are already medical school graduates that cannot get residencies because of the current limitations, which are directly linked to congress limiting funding for those programs!

            Also, I did not attribute any of that stuff to you, which is why I prefaced everything with “The other day I heard someone say,” “Another person said,” and “I continually hear how people are upset.”

            And if you had a job is Massachusetts (and possibly owned a house), in this economy, you believe you can just head out of the state so easily? Do you really believe anyone actually moved because of that law? You have that freedom with the US as well; you could just move out of the country. Plus, polls show the people is Massachusetts like Romneycare.

          4. Investor Junkie

            “Plus, polls show the people is Massachusetts like Romneycare.”

            Therein lies the problem with any entitlement and socialism in general.

            “The road to hell is paved with good intentions”

            In the end polls mean nothing in terms of the economics. “If it’s free, it’s for me”. Everyone votes for stuff that’s for “free” as they think the other guy pays for it. Rich or poor it doesn’t matter.

            See Milton Friedman’s four ways to spend money:


            If someone else was paying for my food (more or less what we have now with HC currently and makes it worse with Obamacare), I would be buying steak and lobster every day! After all I’m not paying.

            You certainly spend your money wiser than some bureaucrat.

        2. so

          That confuses me, too. Opening up an individual insurance market through the exchanges and allowing more insurance companies to participate (now, you are limited in selection unless you have a broker and a LOT of time) will allow folks in their 50s and 60s who feel tied to their employers for the health benefits to more easily become entrepreneurs.

          If you had the stones to invest in 2008, you should be investing in 2012.

          1. Shape

            I also believe having Obamacare will make entrepreneurship even less of a risk because you don’t have to factor in your health. How many people want to start a business but know healthcare will be an issue for them and their family? The premium costs for a family is very high if your employer is not helping you.

            Most negative news articles about this law affecting business are usually not small businesses (e.g. Papa Johns) or misinformed people. If you have a business employing fewer than 25 people with an average salary less than $50,000, then you are not required to give them insurance, but if you do, then you will get a 50% subsidy (oh no, socialism helping a business). Firms with less than 50 employees also are not required to give them insurance. 96% of business falls into the above categories.

            Companies that are required to give insurance probably already do, and they will be able to get it for less money through the insurance exchanges by combining their buying power with other companies.

          2. Investor Junkie


            Let me ask this question? Do you own a business? From what it sounds like I would guess no, but maybe I’m wrong. What is your profession?

            If you do, please tell me how Obamacare helps small businesses? Meaning say 5-10 employees. Let’s keep under the 50 just to make it simple?

            So right now the knowns are:

            – Additional 0.9% medicare tax

            – Middle class who can “afford it” will have to pay a tax to get healthcare. People under a specific income are excluded they get it for “free”

            – Additional regulations to comply as a business owner.

            For the ones over 50 employees many will just drop coverage since the penalty is cheaper than the cost for insurance. There goes that choice again.. The ones that do keep insurance, prices have already increased this year, and suspect will be much higher next. After all the insurance people have to cover more people now so they have to extract more out of the ones who do pay.

            You do realize that benefits typically are $10-30K in additional expense to their salary right?

            Why hire employees? They just became more expensive with Obamacare if you keep insurance. I would rather hire consultants and/or vendors to do the work.

            While for an individual just starting out, yes Obamacare is great. Once you start adding full time employees, it becomes a headache.

            What you are implying in your response is why should insurance be tied to the employer and I agree. Let individuals buy their own insurance and make the market wider, not smaller. That is the only way cost will go down.

          3. Shape

            As I understand it, companies under 50 are not required to provide health insurance. The decision is left to the employees. For companies with 25 or fewer employees, they will get a subsidy if they do provide health insurance. Neither of these seem like negatives even if the business already provides health insurance.

            I was also not aware of a 0.9% tax on the business income, but of personal income above $200,000 (or $125,000 / $250,000 depending on filing and marriage status). I am guessing companies will have to match this on payroll tax.

            Businesses can drop health coverage if they want, but individuals will have to pay for it on their own. But, I really doubt this one will happen wide scale. Even if it does, policies can be adjusted. HC is seen as a benefit to working at a company and dropping HC will hurt moral, employee retention, and recruitment.

            I am actually fine with no employers providing insurance as long as these exchange markets are setup for individuals. My main concern is affordable healthcare for everyone.

          4. so

            “The ones that do keep insurance, prices have already increased this year, and suspect will be much higher next.”

            When was the last year insurance premiums did NOT increase year-over-year in the employer market? I’ve been negotiating with carriers for years now, and it never goes down. Ever.

            ” After all the insurance people have to cover more people now so they have to extract more out of the ones who do pay.”

            This makes no sense. If insurance companies are getting premiums from more participants, how are they “extracting more”?

      2. Investor Junkie

        Ah no it’s not and in the full context is MUCH worse! I’ve watched the speech have you?

        The government creates everything, you individually didn’t do anything.


        1. Shape

          I have watched the speech, but that is not the point here. The “you didn’t build that” is referring to the roads, bridges, etc.; the infrastructure of society. Obama used “that” as a pronoun referring to the previous sentence meaning the “roads, bridges, etc.” The entire paragraph is about that topic.

          Obama even finishes that part of the speech with “The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.” No one is disagreeing with the idea that infrastructure facilitates commerce. Romney does not even disagree with it.

          Romney said “And, of course, he describes people who we care very deeply about, who make a difference in our lives: our school teachers, firefighters, people who build roads. We need those things. We value schoolteachers, firefighters, people who build roads. You really couldn’t have a business if you didn’t have those things.”

          If you want to continue to believe that Obama was really saying, “Business owners don’t build their own business,” then you are willfully participating in this intellectually dishonest argument.

          This idea of Obama being a socialist also needs to be given up. Socialism is not a dirty word or what it is made out to be. The socialist ideas and programs in the US or modern Europe should not be compared to the violent regimes of the past or presents like the Soviet Union, Chian, Cuba, Korea, Vietnam, etc. Saying Obama is a socialist is an insult to all the people who were forced to live under those abusive governments.

          The NFL is socialist. You know what else is socialist? Romney-care, Public Education, Police, Firefighters, the VA Hospital, Jails, Medicare, Unemployment, Libraries, Roads, etc. Anything state run can be considered a redistribution of wealth by providing a service to all, equally. You cannot move that line between what is good and what is “socialist” based on who you are talking about.

          1. Investor Junkie


            I’m not going to repeat the statements I made on my site, as I’ve gone into detail about this subject. Instead I’ll add additional comments to this thread.

            Socialism isn’t a dirty word, but it certainly sucks. How how it worked out for most of the world? And please tell me how Europe is doing again? How has socialism improved the lot of the ordinary people? History can be a bitch if not understood. Next you’ll be telling me Greece isn’t socialist. Riddle me this, why does Europe historically had lower GDP and higher unemployment to the USA?

            Let’s talk about everyone’s socialist utopia France. You do realize in France it’s almost impossible to fire someone once hired right? You don’t think that has anything do with why they have a higher rate of unemployment?


            Lets not talk about some small Scandinavian country that has the GDP of a Rode Island. How is Spain, Italy, and Greece working out? How is France’s 75% tax rate on rich people going to help their economy? The only reason we are not in the same boat is we can print our own money. Though eventually we are in the same boat as them if we don’t change course.

            At least you can be honest and state Obama is a socialist. Other progressives make up excuses.

            Obama’s speech like most about rich people is full of hatred and disgust.It is all about class warfare. In the last 40 years I’ve never heard so much hatred from a sitting President of the United States about one group of people. Even Carter wasn’t this dumb.

            As if the rich are the cause of the country’s ills?? Yes maybe a small select few, but that’s never in Obama’s speeches. It’s about “rich” people in general. I also love the definition of rich by Obama. Anyone making more than $250k. As if someone like the author of this blog jet sets around the country and travels around his yacht. Most of his income isn’t passive… yet.

            His speech is typically made by some third world leader. Seriously you praise this vile this speech?? And I’m not talking about just the “you didn’t build that”. The whole entire speech sucks.

            The government creates everything, you the individual means nothing. You were either “lucky” or somehow abused the system. Your individual effort isn’t part of what helped you succeed. You wouldn’t exist if it weren’t for the government! whatever! I and every tax payer creates the government.

            Also implied is if the rich are the cause of why others are poor. More or less stating “the evil rich people are stealing from poor people”. Like rich people go up to poor people and steal their money?? Please! Obama has absolutely no idea how the economy works, how small businesses work, and how to grow the economy. It is plain as day.

            In addition the ameba statement of “fair share”… What is “fair”? What is fair to one might be unfair to others.

            Can you please tell me how even taxing the rich at 100% (250K and over) is going to balance the budget deficit? Answer it won’t. Obama has absolutely no solutions other than “taxing the rich” and creating new and expanding existing unsustainable entitlements.

            If you believe the economic pie is fixed than Obama is your man. In reality the economic pie isn’t fixed, and you are more than welcome to bake your own.

            Obama’s speeches are all about platitudes with no real world solutions. It’s about vilifying a group that for the most part had nothing to do with the economic mess and in reality already pay most of the taxes.

          2. Shape

            I don’t really like either choice, Obama or Romney, but we are f’d with this 2 party system. Obama does pander to his audience by vilifying the rich. It is a lot of, “Don’t worry, the rich will pay for it.”

            Most of Europe is too socialist. But, both capitalism and socialism, on their own, are bad. Capitalism is the best economic system of the two, but some socialist elements are needed. Think public education.

            I am fully happy with what programs we have now, but I just want something major done about healthcare. In needs to be affordable. Outside of that one though, I don’t want anymore government programs and some need to be cutback. I have no problem with Social Security being privatized either. I do have a problem with jails, police, and military being privatized though.

  9. Six figure investor

    Its incorrect to assume that hoarding cash doesnt impact the economy in the same way that investing or consuming does. Cash is used for consumer loans as well as shorter term business loans when held at banks ot credit unions.

    Though cash is a poor investment because its usually fully taxable and prevents you from getting all the breaks available by investing. To get the breaks you need to put the capitak at risk. This is what the savers are umwilling to do.

  10. My Money Design

    If someone is smart enough to know when to hold onto their money, then there should not be any penalties or foul play declared – no matter how rich they are. Nice work on boosting up your savings rate.


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