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Slide 1 Timothy Flacke D2D Fund, Inc. CFED Assets Learning Conference September 12, 2008 Returning America to Thrift U.S. Savings Bonds at Tax Time.

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Presentation on theme: "Slide 1 Timothy Flacke D2D Fund, Inc. CFED Assets Learning Conference September 12, 2008 Returning America to Thrift U.S. Savings Bonds at Tax Time."— Presentation transcript:

1 Slide 1 Timothy Flacke D2D Fund, Inc. CFED Assets Learning Conference September 12, 2008 Returning America to Thrift U.S. Savings Bonds at Tax Time

2 Slide 2 Agenda Context Context Opportunity Opportunity Challenge & An Idea Challenge & An Idea Tax Time Tests Tax Time Tests What Now? What Now?

3 Slide 3 Where Are We? Sources: Washington Post Federal Reserve Bank Record Debt Ever Rising…

4 Slide 4 Where Are We? Source: Federal Reserve Bank Savings Rate… At Historic Lows

5 Slide 5 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 compelling vision, a goal…

6 Slide 6 “Return America to Thrift”* Refocus our national values on saving, investing, restraint, sacrifice for the future Refocus our national values on saving, investing, restraint, sacrifice for the future “Return” - idea with precedent, history; a restoration“Return” - idea with precedent, history; a restoration “America”- everyone; for individuals and the nation“America”- everyone; for individuals and the nation “Thrift” - a way of life, a value - not just a single act“Thrift” - a way of life, a value - not just a single act But How??? *See for more on “thrift”

7 Slide 7 Agenda Context Context Opportunity Opportunity Challenge & An Idea Challenge & An Idea Tax Time Tests Tax Time Tests What Now? What Now?

8 Slide 8 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 about tax (refund) season? 138MM tax filers (2006) open to all Americans not going anywhere every year EITC, refunds already in place

9 Slide 9 Tax Time Opportunity: How Big? $250 billion each tax season $250 billion each tax season 107 million households107 million households $115b to LMI (HH AGI <$40k) $115b to LMI (HH AGI <$40k) –68 million households –on average ~ $1,679 4% of annual income4% of annual income –in some cases, $3,000+ up to 30% of annual incomeup to 30% of annual income Perspective: Annual AFI Appropriation? Annual AFI Appropriation? $24MM (06-08) $24MM (06-08) * Annual TANF Block Grant? Annual TANF Block Grant? $17B (06-08) $17B (06-08) * * Source: HHS / ACF (www.acf.hhs.gov/programs/ola b/budget/2008/fy2008apt.htm) Source: IRS, tax year 2006 data (http://www.irs.gov/pub/irs-soi/06in33ar.xls)

10 Slide 10 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 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 Software EASY IRA Processing – Refund SplittingPromote - Examples: Private Campaigns Public Campaigns

11 Slide 11 Agenda Context Context Opportunity Opportunity Challenge & An Idea Challenge & An Idea Tax Time Tests Tax Time Tests What Now? What Now?

12 Slide 12 Persistent Challenge: Product To save, everyone needs a “bucket” To save, everyone needs a “bucket” Ideal characteristics? Ideal characteristics? –appealing to clients credible, good return, low risk, no feescredible, good return, low risk, no fees –easy to explain to tax payers, volunteers, staffto tax payers, volunteers, staff –easy 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

13 Slide 13 A Built-to-Order Product? Barrier Small balances Small balances Spotty (credit) past Spotty (credit) past Risk averse Risk averse Mistrust mainstream financial service firms Mistrust mainstream financial service firms No bank account No bank account Unclear goal(s) Unclear goal(s) Long-term goals & liquidity needs in tension Long-term goals & liquidity needs in tension Bond Feature Low $50 minimum Low $50 minimum No credit screen No credit screen Risk free principal Risk free principal Gov’t backed, no fees, good return (4.28%) Gov’t backed, no fees, good return (4.28%) No bank acct required No bank acct required Can save for anything Can save for anything Long-term orientation, access after 1 year Long-term orientation, access after 1 year Barriers facing many first time, low-income savers & relevant features of U.S. Series I Savings Bonds

14 Slide 14 Agenda Context Context Opportunity Opportunity Challenge & An Idea Challenge & An Idea Tax Time Tests Tax Time Tests What Now? What Now?

15 Slide 15 Tax 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 TS08 More 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

16 Slide 16 Findings: Who Buys How Much Strong demand Strong demand –1,600+ buyers / 2,500+ registrants (TS07 & 08) –$300k+ saved –take up (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

17 Slide 17 More 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%)

18 Slide 18 Interpreting the Findings We believe savings bonds: We believe savings bonds: –resonate with target audience high awareness, documented demandhigh awareness, documented demand –fill unmet need universally available, trustworthy, easy entryuniversally available, trustworthy, easy entry –facilitate long-term, goal oriented saving for kids, education, stated intent to holdfor kids, education, stated intent to hold –“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’t BUT, this national asset is wasting away...

19 Slide 19 Agenda Context Context Opportunity Opportunity Challenge & An Idea Challenge & An Idea Tax Time Tests Tax Time Tests What Now? What Now?

20 Slide 20 A National Saving Plan? Tax (refund) Time... $100,000,000, Refund Splitting... + U.S. Savings Bonds ATA Spend SomeSave Some FORM 8888

21 Slide 21 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 changes e.g., 6 mon min., ITINs, emergency redemptionse.g., 6 mon min., ITINs, emergency redemptions –medium-term - low cost e.g., bonds on F8888, restate marketing budgete.g., bonds on F8888, restate marketing budget –long-term - moderate cost LMI incentive or subsidy for bonds (e.g., Saver’s Bonus Act)LMI incentive or subsidy for bonds (e.g., Saver’s Bonus Act)

22 Slide 22 Future Form 8888

23 Slide 23 Idea Getting Traction Legislative Legislative New Saver’s ActNew Saver’s Act Saver’s Bonus ActSaver’s Bonus Act Press attention Press 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

24 Slide 24 How You Can Help Participate in TS09 Pilot Participate in TS09 Pilot –goal to expand pilot, focus impact –seeking large, committed VITA sites –RFP out now – due 9/19 Talk to us if you are interestedTalk to us if you are interested Join bond advocacy group Join bond advocacy group –help build awareness –issue requires grassroots, community support –See Join Roundtable today to see Bond Portal, discuss RFP

25 Slide 25 Questions / Discussion D2D Fund, Inc. Timothy Flacke


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