Solving America’s Savings Challenge
Helping Americans Get on Track to a More Secure Financial Future
December 14, 2011
The following is an excerpt from remarks by Ronald P. O’Hanley, President, Asset Management and Corporate Services, Fidelity Investments, who spoke at the National Forum to Encourage Lower-Income Household Savings in October.
American workers are facing challenges on all fronts – a persistently weak jobs market, declining housing prices, rising food and health care costs, $3.50 per gallon gas, and the daunting challenge of making ends meet today while saving for tomorrow. Even more disturbing is that one-third of all American households have no retirement savings beyond Social Security.
The weak economy and volatile financial markets have left many Americans unsure how to address their financial goals. Many have lost confidence in their ability to save. They feel overwhelmed by the challenge – so they don’t even try. We need to help Americans navigate their way through these difficult times and get them on track to a more secure financial future.
Here are four simple steps that could help Americans increase savings and retirement readiness:
- Preserve existing IRA and workplace retirement programs. These plans offer efficient, convenient, and effective ways to save for retirement. We need to preserve incentives that are helping Americans save for retirement.
- Expand the Saver’s Credit and make it refundable. The Saver’s Credit is a non-refundable tax credit available to eligible taxpayers who contribute to employer-sponsored or governmental retirement plans, or Traditional or Roth IRAs. It’s a great benefit, but because it is a tax credit, it’s not available to anyone who doesn’t have federal tax liability. Making the Saver’s Credit refundable would be a powerful incentive for some 45 million low- and middle-income tax filers who do not have any federal tax liability.
- Automate the saving process. Automatically enrolling in savings programs and automatically increasing future savings produces powerful results. A fundamental principal of behavioral economics is that once a decision is made, chances are people won’t take action to undo that choice.
- Give investors financial education and guidance they can trust. The continued uncertainty in the markets, in Washington, and around the globe has investors more confused than ever about what to do. We must ensure that Americans have easy access to financial education and guidance, and that any public policy initiatives in this area not cause unintended consequences by restricting such services.
The size and seriousness of America’s savings challenge is widely recognized. Now is the time to get more serious about solving it. Success will require the coordinated efforts of all concerned -- government, employers, financial institutions, consumer groups, the media, and most importantly of all, individuals.