Savings

The Urban Institute has a new report out today that looks at America's wide(ning) racial wealth gap: research shows that while white Americans have on average double the income of black Americans, they have more than six times the wealth. The report demonstrates that wealth inequality is actually increasing, not decreasing over time. Watch Signe-Mary McKernan, one of the report's authors, explain the dynamics of the gap in this short, engaging video:

The real problem in the long term, McKernan points out, is that racial wealth disparities limit access to economic opportunity. Wealth provides the foundation on which families enter and remain in the middle class. As the report explains, "traditionally powerful wealth-building vehicles" such as retirement savings or homeownership have near and long-term benefits: they help families weather economic downturns and offer future generations a stepping stone to greater economic success.

The authors are quick to note that the recent Great Recession did not cause these racial wealth gaps, but did exacerbate them.

Until recently, the “three-legged stool” was the reigning metaphor for achieving retirement security. Workers could anticipate being supported as they aged by a combination of Social Security benefits, private pension income, and personal savings. This model no longer holds. Traditional pensions have almost disappeared from the private workforce, personal savings are low, and Social Security benefits face political and actuarial threats. The new model relies on defined contribution (“DC”) plans like the 401(k).

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include financial security, housing, gender equality, the safety net, and workforce and consumer protection.

As we’ve been saying for many years, America faces a retirement savings crisis. We think Congress has a good opportunity to address the crisis, which is why we recently sent comments to the House Ways and Means Committee recommending ways to fix the nation’s retirement system. However, we’ll freely admit that there’s more than one way to skin a cat.

Today, the Asset Building Program is releasing a new issue brief about an innovative, state-level response to the retirement savings crisis – the California Secure Choice Retirement Savings Program. Currently, over six million private sector workers in California lack access to a retirement savings account through their employers; nationwide, only about half the private workforce has access to such accounts, and low-income workers have particularly low rates of access. California Secure Choice (“CSC”) would automatically create an account for all private sector workers in the state who lack coverage through their workplace, thus enabling a much broader swath of the population to accumulate essential savings to supplement their Social Security benefits. Below are some key features of the program:

In February, we reported that Hawai’i was on the verge of eliminating its TANF asset test. Yesterday, Governor Neil Abercrombie signed the bill, HB 868, and made it official.

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include housing, unemployment, financial products, taxes, and inequality.

After our event on "prize-linked savings" yesterday, I sat down with Joanna Smith-Ramani of D2D and recorded a short podcast focused on the basics. What are prize-linked savings? Where did the idea come from? Can giving people prizes really help to induce more savings? What's happening with this idea now? You can listen to our conversation here:

Yesterday we hosted an event along with our partners at the Doorways to Dreams Fund (D2DFund) to examine the potential of lottery-style programs and products to promote personal savings. The idea of “prize-linked savings” (PLS) emerged out of the observation that while many Americans enjoy playing the lottery or gambling, large numbers of us do not have the personal savings necessary to cope with an emergency. Researchers, advocates, and others in the field noted the existence of PLS programs in other countries and thought that a similar motivational tool could work in the U.S.--if saving was as much fun as playing the lottery, more people would participate. Pilot programs and legislative proposals have emerged to take this concept to scale in several U.S. states. You can watch a recording of the event here or read on for the key takeaways.

The House Ways and Means Committee created a series of working groups to investigate problems with the tax code and solicit suggestions for reform. The Asset Building Program at the New America Foundation is dedicated to incubating and promoting innovative public policies to enable low- and middle-income families in the United States to accumulate savings, access wealth-building financial services, develop financial capability, and build and protect productive assets across the life course.

This post is co-authored by Krista Holub, a program manager for the Center for Social Development at Washington University in St. Louis and works primarily on the Refund to Savings initiative, focusing on development, implementation, and research; and David Rothstein, a research fellow in the Asset Building Program, as well as a researcher at Policy Matters Ohio.