Archive for the ‘Economy’ Category

Thou Shalt Save!
October 13, 2009

Jon Hanson is a new guest blogger for It’s Your Money.

Uncle Sam wants you! To have an IRA! Proposed in President Obama’s 2010 budget is a provision for automatic enrollment of employees in IRA’s for employers that do not offer traditional 401K plans.

The good:

  • It encourages savings, and even though you can opt out,few will. Jennifer Monnin of Nationwide Insurance, at an October 2008 National Savings Forum I attended in D. C. for America Saves, says 95 percent of Nationwide employees do not opt out of their auto 401K.
  • Cutting edge employers could add educational opportunities to the program and increase employee loyalty and stability. Employees with a financial plan and goals are less stressed and more productive.
  • Employers with less than 10 employees would be exempt and employees that earn under $5,000 a year would not be counted, according to Stephen Miller of SHRM.

The bad:

  • The matching contribution by the government is simply forced redistribution of taxpayers’ money. I would like to see the match be voluntary and by the employer.
  • If you do not initiate the savings, will you learn anything?
  • It could be a burden on employers: more burden, less jobs.

The New York Times offered this explanation of the government matching funds, “For households that earn under $65,000, the federal government will match savings up to $1,000 a year with a 50 percent tax credit. So if you saved $500, you would get $250 dropped directly into your I.R.A. This tax credit is refundable, which means you would get it regardless of how much you pay in federal taxes each year. The credit would phase out between $65,000 and $85,000 of household income or half of that if you are single.”

It takes legislation to bring it to reality: Read more: Automatic IRA Act of 2007 not final versions (S. �1141 �& H.R �2167). Other: CFED, Brookings, Heritage

Jon Hanson is the author Good Debt, Bad Debt and Gooddebt.com

A Best Bet Self-Improvement Book “… bracing, snappily written.”
– People Magazine

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

Advertisements

What Will Happen When Frugal Isn’t Cool Anymore?
October 6, 2009

Lately, it seems that everywhere I turn, financial institutions and other organizations are boasting about the increase in the national savings rate. Personal spending is down sharply from 2007, while the national savings rate, which dipped below zero a few years ago, went above six per cent earlier this year, finds James Surowiecki of The New Yorker.

Up until October 2008, the U.S. was at a negative savings rate, which basically meant that, as a country, we spent more than we saved. With the availability of credit, and a strong economy, it was easy to adopt a “buy now, pay later” way of thinking. “There’s so much marketing pressure to spend and buy and have instant gratification. And if you can’t buy it now, put it on your credit card,” says Nancy Register, of the Consumer Federation of America.

In a recent blog post, Thomas J.Fox discussed the “Demise of Affluenza”. He cited a recent Consumer Reports survey that dubbed the new savings behavior intelligent thrift. With the unemployment rate rising, people have had to base their spending on needs rather than wants. Frugal is cool, only because there isn’t another choice. So, is the new savings rate truly indicative of changed behavior? Or, is this a fear mentality?

Once the economy improves, will this thrifty behavior continue? Or will many people simply return to their old ways of spending? History tells us that after 9/11 and the Great Depression, Americans went on a spending spree. Will this be the case for us? Or will the hard earned lessons of the past year pave the way for continued thriftiness?

For the sake of you, me, all Americans (and our nation) … I hope this time financial sensibility sticks around for good.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine