Slide 1
Timothy FlackeTimothy FlackeD2D Fund, Inc.D2D Fund, Inc.
CFED Assets Learning ConferenceCFED Assets Learning ConferenceSeptember 12, 2008September 12, 2008
Returning America to Thrift
U.S. Savings Bonds at Tax Time
Slide 2
AgendaAgenda
ContextContext
OpportunityOpportunity
Challenge & An IdeaChallenge & An Idea
Tax Time TestsTax Time Tests
What Now?What Now?
Slide 3
Where Are We?Where Are We?
Revolving Debt Outstanding(in Millions)
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
1960 1970 1980 1990 2000
Average Household Credit Card Debt
$-
$2,000
$4,000
$6,000
$8,000
$10,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
1994: $4,301
2006: $9,659
Sources:Washington PostFederal Reserve Bank
Record DebtRecord Debt
Ever Rising…Ever Rising…
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Where Are We?Where Are We?
U.S. Personal Savings Rate
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1960 1970 1980 1990 2000
Source: Federal Reserve Bank
Savings Rate…Savings Rate…
At HistoricAt HistoricLowsLows
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Implications for Asset Building Field?Implications for Asset Building Field?
Our work is not yet done!Our work is not yet done!• need greater than everneed greater than ever• face large, powerful forcesface large, powerful forces
Need more, different strategies?Need more, different strategies?• broad-based / universalbroad-based / universal• permanentpermanent• long-termlong-term• bold (but pragmatic)bold (but pragmatic)
We need a We need a compelling visioncompelling vision, a , a goalgoal……
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““Return America to Thrift”*Return America to Thrift”*
Refocus our national values on saving, Refocus our national values on saving, investing, restraint, sacrifice for the futureinvesting, restraint, sacrifice for the future
• ““Return” - idea with precedent, history; a restorationReturn” - idea with precedent, history; a restoration• ““America”- everyone; for individuals America”- everyone; for individuals and and the nationthe nation• ““Thrift” - a way of life, a value - not just a single actThrift” - a way of life, a value - not just a single act
But But How???How???
*See www.newthrift.org/ for more on “thrift”*See www.newthrift.org/ for more on “thrift”
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AgendaAgenda
ContextContext
OpportunityOpportunity
Challenge & An IdeaChallenge & An Idea
Tax Time TestsTax Time Tests
What Now?What Now?
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Where to Begin?Where to Begin?
To return America to thrift we need:To return America to thrift we need:• ScopeScope
• UniversalityUniversality
• PermanencePermanence
• RecurrenceRecurrence
• PragmatismPragmatism
Where can we find these?Where can we find these?
How aboutHow about tax (refund) season?tax (refund) season?
138MM tax filers (2006)138MM tax filers (2006)
open to all Americansopen to all Americans
not going anywherenot going anywhere
every yearevery year
EITC, refunds already in placeEITC, refunds already in place
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Tax Time Opportunity: How Big?Tax Time Opportunity: How Big?
$250 $250 billionbillion each tax season each tax season• 107 million households107 million households
$115b to LMI $115b to LMI (HH AGI <$40k)(HH AGI <$40k)– 68 million households68 million households– on average ~ $1,679on average ~ $1,679
• 4% of annual income4% of annual income– in some cases, $3,000+in some cases, $3,000+
• up to 30% of annual incomeup to 30% of annual income
Perspective:Perspective: Annual AFI Annual AFI
Appropriation?Appropriation?
$24MM$24MM (06-08) (06-08)*
Annual TANF Annual TANF Block Grant?Block Grant?
$17B$17B (06-08) (06-08)*
* Source: HHS / ACF (www.acf.hhs.gov/programs/olab/budget/2008/fy2008apt.htm)
Source: IRS, tax year 2006 data (http://www.irs.gov/pub/irs-soi/06in33ar.xls)
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Process
Facilitate investment of refunds into
savings vehicles
Promote
Inform clients of saving
opportunity & rationale
Product
Provide clients a suitable,
affordable place to save
SAVE!
Tax Time Saving Framework Tax Time Saving Framework 4 essential elements (4 “P’s”):4 essential elements (4 “P’s”):
Prompt
Present an actionable, compelling
saving offer at key moment
Prompt - Examples
• Training Volunteer Preparers
• Commercial Preparers
• Self Preparation SoftwareEASY IRA
Processing – Refund SplittingPromote - Examples:
• Private Campaigns
• Public Campaigns
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AgendaAgenda
ContextContext
OpportunityOpportunity
Challenge & An IdeaChallenge & An Idea
Tax Time TestsTax Time Tests
What Now?What Now?
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Persistent Challenge: ProductPersistent Challenge: Product
To save, everyone needs a “bucket”To save, everyone needs a “bucket” Ideal characteristics?Ideal characteristics?
– appealing to clientsappealing to clients• credible, good return, low risk, no feescredible, good return, low risk, no fees
– easy to explaineasy to explain• to tax payers, volunteers, staffto tax payers, volunteers, staff
– easy to processeasy to process• no compliance issues, no required 3rd partyno compliance issues, no required 3rd party
Other:Other:• research shows too much choice overwhelmsresearch shows too much choice overwhelms• simplicity easier to sell, easier to administersimplicity easier to sell, easier to administer
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A Built-to-Order Product?A Built-to-Order Product?
BarrierBarrier Small balancesSmall balances Spotty (credit) pastSpotty (credit) past Risk averseRisk averse Mistrust mainstream Mistrust mainstream
financial service firmsfinancial service firms No bank accountNo bank account Unclear goal(s)Unclear goal(s) Long-term goals & Long-term goals &
liquidity needs in tensionliquidity needs in tension
Bond FeatureBond Feature Low $50 minimumLow $50 minimum No credit screenNo credit screen Risk free principalRisk free principal Gov’t backed, no fees, Gov’t backed, no fees,
good return (4.28%)good return (4.28%) No bank acct requiredNo bank acct required Can save for anythingCan save for anything Long-term orientation, Long-term orientation,
access after 1 yearaccess after 1 year
Barriers facing many first time, low-income savers & Barriers facing many first time, low-income savers & relevant features of U.S. Series I Savings Bondsrelevant features of U.S. Series I Savings Bonds
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AgendaAgenda
ContextContext
OpportunityOpportunity
Challenge & An IdeaChallenge & An Idea
Tax Time TestsTax Time Tests
What Now?What Now?
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Tax Time TestsTax Time Tests
Nice idea, but…Nice idea, but…• Does anyone want them?Does anyone want them?• Will it matter if they do?Will it matter if they do?
Tax time “Refunds to Assets” pilots Tax time “Refunds to Assets” pilots • TS07 – 4 VITA sites, 27 H&R Block officesTS07 – 4 VITA sites, 27 H&R Block offices• TS08 – 32 VITA sitesTS08 – 32 VITA sites
More on TS08More on TS08• 15 VITA organizations, 32 tax sites in 13 states15 VITA organizations, 32 tax sites in 13 states• 25k+ tax clients (avg. AGI: $18k) offered bonds25k+ tax clients (avg. AGI: $18k) offered bonds• processing & support from H&R Block Bankprocessing & support from H&R Block Bank• orders via new web-based Bond Portalorders via new web-based Bond Portal
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Findings: Who Buys How MuchFindings: Who Buys How Much Strong demandStrong demand
– 1,600+ buyers / 2,500+ registrants 1,600+ buyers / 2,500+ registrants (TS07 & 08)(TS07 & 08)– $300k+ saved$300k+ saved– take up take up (VITA)(VITA)
• 6 - 9% (high of 17 / 23%) vs. 1.2% for CD6 - 9% (high of 17 / 23%) vs. 1.2% for CD• 38% repeat buying rate38% repeat buying rate
Buyer profile (TS08 VITA sample)• 81% female• 74% parents, 15% grandparents• avg. AGI: $19.9k
Extraordinary awareness• 74% “familiar” w/ bonds • vs. 26% for IRAs, 34% for CDs
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More FindingsMore Findings First time savings? (TS08)
• no prior $ saved (64%)– Less than $1k saved (84%)
• bond = 1st time saving part of refund (37%)• “would’ve saved less if hadn’t bought bond” (51%)• have savings account w/ $100+ (32%)
Savings plan / intent• bought for children (59%), grandkids (8%)• saving for long-term, defined goal (74%)
– (e.g., education for self or child, retirement)
• plan to hold bond 5 yrs+ (58%), 10 yrs+ (40%)– TS07 redemptions after 1 year: 11% vs. 10% for general pop
• bought b/c “it’s a way I can be sure to save” (35%)
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Interpreting the FindingsInterpreting the Findings
We believe savings bonds:We believe savings bonds:– resonate with target audienceresonate with target audience
• high awareness, documented demandhigh awareness, documented demand
– fill unmet needfill unmet need• universally available, trustworthy, easy entryuniversally available, trustworthy, easy entry
– facilitate long-term, goal oriented savingfacilitate long-term, goal oriented saving• for kids, education, stated intent to holdfor kids, education, stated intent to hold
– ““lure” people in to saving (habit)lure” people in to saving (habit)• evidence of first time savingevidence of first time saving• may foster pattern of saving (38% repeat rate)may foster pattern of saving (38% repeat rate)
– at low cost to the gov’tat low cost to the gov’t
BUT, this national asset is wasting away...BUT, this national asset is wasting away...
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AgendaAgenda
ContextContext
OpportunityOpportunity
Challenge & An IdeaChallenge & An Idea
Tax Time TestsTax Time Tests
What Now?What Now?
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A National Saving Plan?A National Saving Plan?
Tax (refund) Time...
$100,000,000,000+
+ Refund Splitting...
+ U.S. Savings Bonds
ATA
Spend Some Save Some
FORM 8888
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But How?But How?
Vision: a “bond in every pot” (at tax time)Vision: a “bond in every pot” (at tax time)• 1: How much is my refund?1: How much is my refund?• 2: How much should I save?2: How much should I save?• 3: Check off box3: Check off box
3 phase strategy:3 phase strategy:– short-term - no cost changesshort-term - no cost changes
• e.g., 6 mon min., ITINs, emergency redemptionse.g., 6 mon min., ITINs, emergency redemptions– medium-term - low costmedium-term - low cost
• e.g., bonds on F8888, restate marketing budgete.g., bonds on F8888, restate marketing budget– long-term - moderate costlong-term - moderate cost
• LMI incentive or subsidy for bonds (e.g., Saver’s LMI incentive or subsidy for bonds (e.g., Saver’s Bonus Act)Bonus Act)
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Future Form 8888Future Form 8888
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Idea Getting TractionIdea Getting Traction
LegislativeLegislative• New Saver’s ActNew Saver’s Act• Saver’s Bonus ActSaver’s Bonus Act
Press attentionPress attention• Time magazine (Time magazine (July 17, 2008)• Money magazine (August, 2008)Money magazine (August, 2008)• The New York Times (July 31, 2008)The New York Times (July 31, 2008)• Jane Bryant Quinn on Bloomberg.comJane Bryant Quinn on Bloomberg.com
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How You Can HelpHow You Can Help
Participate in TS09 PilotParticipate in TS09 Pilot– goal to expand pilot, focus impactgoal to expand pilot, focus impact– seeking large, committed VITA sitesseeking large, committed VITA sites– RFP out now – RFP out now – due 9/19due 9/19
• Talk to us if you are interestedTalk to us if you are interested
Join bond advocacy groupJoin bond advocacy group– help build awarenesshelp build awareness– issue requires grassroots, community supportissue requires grassroots, community support– See www.d2dfund.org/workinggroup See www.d2dfund.org/workinggroup
Join Roundtable today to see Bond Portal, discuss RFP
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Questions / DiscussionQuestions / Discussion
D2D Fund, Inc.www.d2dfund.org
Timothy Flacke617.541.9064
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