Ownership & Assets

In his latest installment of global development wonkery for Business Week, our New America Fellow Charles Kenny (whom we share with the Center for Global Development) eloquently argues that the World Bank and IMF’s latest calls to all but rid the world of “extreme poverty” by 2030 are – to put it nicely – not nearly ambitious enough. This line is particularly clutch: “It seems wrong that most of the planet would subsist for a day on what many happily throw away on a [Starbucks Venti Caramel Frappuccino] and . . . that level of expenditure still doesn’t guarantee people a quality of life we should all deserve.” While I’d even argue that income itself as a measure of poverty and inequality falls flat in various and collective efforts to enable prosperity for all around the world – access to savings and asset building opportunities, in addition to income, is likely a much more powerful means of eradicating poverty over the long haul – I salute the audacity and optimism he conveys in this compelling piece and encourage others to check it out.

On April 9, 2013, the Savings Bond Working Group, a coalition of national and grassroots non-profit organizations, commercial tax preparers, tax software firms, and public officials, sent a letter to U.S. Secretary of the Treasury Lew regarding access to U.S. Savings Bonds at tax time. Asset Building Program Director, Reid Cramer, along with other members of the working group, called for continued commitment from the Treasury Department to preserving and modernizing access to U.S. Savings Bonds as a secure, simple, and powerful savings tool for working Americans at tax time.

On May 1, 2013, Reid Cramer presented during a webinar with the Shriver Center. His presentation is attached to the right or available here for download. Other presenters included Alan Weil, Executive Director of the National Acadmy of State Health Policy and David Himmelstein, Professor of Public Health at Harvard University and Hunter College.

The Equal Rights Center (ERC), a civil rights organization, has a new report out that documents the presence of fair housing violations in rental markets across the state of Virginia.The report identifies anti-immigration legislation and accompanying "hostility toward immigrant communities, particularly Latino communities" as possible contributing factors to this discrimination in the rental housing market. The findings are clear: Latino rental housing applicants received more adverse treatment than their white counterparts (who were of similar income, credit and occupational backgrounds). This pattern is alarming because discrimination in housing access can lead to disparity of opportunity and reinforce residential segregation over time. 

It's hardly news that traditional pensions have almost disappeared from the private workforce, personal savings are low, and Social Security benefits face political and actuarial threats. But the story that needs more attention among those concerned with retirement security is how the rise of the 401(k)-type plan as a policy effort is failing in fundamental ways. Half of the workforce does not have an account and many that do still are not contributing enough to meet their expectations. Without further action, the transition to a 401(k)-based system will become a large-scale policy failure.

If we are going to rely on this account-based system of saving for retirement, at a minimum we have to make sure everyone has an account and can make steady contributions throughout their time in the workforce. The Obama administration has proposed creating Auto-IRAs to get most workers an account, but Congress has been slow to act. A number of states are considering moving ahead with their own efforts.

Last fall California took an affirmative step forward with the passage of SB 1234, a bill to create the California Secure Choice Retirement Savings Program (CSC). The law puts into place an innovative process by which California will begin to address their retirement savings crisis.

The Asset Building Program is releasing a new issue brief examining California's effort. Written by Aleta Sprague, the paper, entitled California Secure Choice Retirement Savings Program: An Innovative Response to the Coming Retirement Security Crisis, describes how the program will create an account for all private sector workers in the state who lack coverage through their workplace. This will create access for more than six million uncovered workers and enable more families to build up the resources to supplement their Social Security benefits.

Editor's note: This post was authored by Julia Arnold, a Research Fellow with the Global Assets Project, and originally appeared on the Center for Financial Inclusion's blog.

Many of the challenges to saving faced by the world’s poorest people were highlighted in the recent Washington Post article Microsavings Programs Build Wealth, Pennies at a Time.  Among others, the article articulated two especially salient points around microsavings: 1) we know the poor save, and 2) savings can help poor people withstand shocks to their income (such as unexpected medical emergencies or job loss) without going further into debt and poverty. However, low-income people tend to rely on informal methods of savings, often putting their money at risk of being lost, stolen, or ruined by floods or rodents. Having a safe, reliable place to save is both beneficial to and desired by the world’s poorest people. 

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: