Savings

Asset Building News Week, May 13-17

May 17, 2013
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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 inequality, retirement, the workforce, and financial services.

Student Loan Debt May Put Young Adults in Financially Precarious Standing

May 13, 2013
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Student loan debt has been in the news a lot these days. In the last week, a number of news outlets wrote about mounting student loan debt and the delaying of life events by their borrowers (see ABC News, the Chronicle of Higher Education, CNN Money, the NY Times [here and here], and the Wall Street Journal, to name a few). The article in the NY Times provides a great example of this, "Consider Shane Gill, a 33-year-old high-school teacher in New York City. He does not have a car. He does not own a home. He is not married. And he is no anomaly: like hundreds of thousands of others in his generation, he has put off such major purchases or decisions in part because of his debts."

Tax Reform: The Options

May 8, 2013
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As part of their effort to reform the tax code, the House Ways and Means Committee created a series of working groups and put out a call for public comment on tax reform ideas.

Asset Building News Week, April 29-May 3

May 3, 2013
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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 retirement security, racial wealth disparities, housing, and homelessness.

Medicaid Is Asset Building?

May 2, 2013

A new study came out this week evaluating the impact Medicaid coverage has on participants' health, financial lives, and general well-being. Sarah Kliff describes the study design:

The research uses data from Oregon, where the state held a lottery among low-income adults in 2008 for a limited Medicaid expansion. Of the 90,000 people who applied, 10,000 ultimately gained coverage. The lottery gave researchers a unique opportunity to conduct the first randomized experiment on Medicaid coverage, by studying those who gained insurance through the lottery and comparing them against a similar group of adults who did not.

The randomization of the study is an important feature: other studies have struggled to control for the differences in people who seek out Medicaid coverage and those who do not (but may be eligible). As Joe Colucci from New America's Health Policy team explains, "That created an incredible research opportunity - the randomized design allows researchers to really see the effect of Medicaid enrollment on people’s health, and hopefully put to bed the nonsense idea that Medicaid is bad for people’s health."

The study looked at what impact Medicaid coverage has on people's physical health, as measured by things like blood pressure, cholesterol levels and other "easy to obtain" indicators. In the two year study period, the researchers found "few short-term physical health gains," which came as a surprise and disappointment to some and as fodder for others to decry the program as ineffective. (The results on the physical health side are complicated and mixed, but I would refer you to Kevin Drum's analysis for more on some of the statistical issues at play. A question posed Aaron Carroll and Austin Frakt is also relevant here: "How many people saying that are ready to give up insurance for themselves or their family?") 

From an asset-building perspective, the really amazing finding from the study is on the impact Medicaid coverage had on participants' financial security. Jonathan Cohn explains:

The big news is that Medicaid virtually wiped out crippling medical expenses among the poor: The percentage of people who faced catastrophic out-of-pocket medical expenditures (that is, greater than 30 percent of annual income) declined from 5.5 percent to about 1 percent. In addition, the people on Medicaid were about half as likely to experience other forms of financial strain—like borrowing money or delaying payments on other bills because of medical expenses.

I bolded parts of that because I really want to emphasize what a striking impact having health insurance had on people's financial situations. On top of the benefits to low-income people's financial security, the study also reported "significant improvements in mental health outcomes, with rates of depression falling by 30 percent."

The Future of the U.S. Savings Bonds at Tax Time

May 1, 2013

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.

The Affordable Care Act, Poverty, and Asset Building

May 1, 2013

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.

California's Innovative Response to the Coming Retirement Security Crisis

April 30, 2013
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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.

Can Mobile-Enabled Savings Products Bridge the Youth Financial Services Gap?

April 29, 2013
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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. 

New Research on How Wealth Inequality Limits Economic Opportunity

April 29, 2013

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.

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