Throughout the state of Oregon, Neighborhood Partnerships works to create opportunity for low and moderate income families through the Individual Development Account (IDA) Initiative. The IDA Initiative is a matched savings program that helps hard working Oregonians build economic security by teaching savings habits that help them purchase a first home, start or expand a small business, or pursue higher education. Federal policies that facilitate and encourage savings are essential for supporting the important asset building work that’s happening here in Oregon.
We moved a step closer to that goal last night.
President Barack Obama mentioned expanding matched savings accounts in last night’s State of the Union address . His proposal aligns with the Savings for American Families’ Future Act (H.R. 1961), which would extend retirement savings incentives to more than 50 million Americans by improving and strengthening the existing federal Saver’s Credit.
President Obama’s proposal couldn’t come at a better time. Today only half of American households (52%) have a retirement savings plan, and if you look at households of lower income workers, you’ll see that low income workers are much less likely to save for retirement than their higher income counterparts. Social Security is the sole source of income for one in five Americans age 65 and older. For one in three seniors, Social Security represents almost all of their retirement income (more than 90%).
Savings for American Families’ Future Act will enhance the effectiveness of the Saver’s Credit by:
- Making the Saver’s Credit refundable. The current credit only applies to families with a federal income tax liability. One in three (35%) households do not pay federal income tax in a given year because their incomes are too low. While these families pay plenty of taxes, federal law only recognizes federal income tax when providing a Saver’s Credit match.
- Providing a flat 50% match on qualified contributions up to $500 for an individual or $1,000 for a couple. The proposal also calls for annual increases of $100 for single filers and $200 increases for joint filers through 2020.
- Increasing the income eligibility requirement to $65,000 for joint filers, $48,750 for head of household, and $32,500 for single filers.
- Automatically depositing matching contributions into a designated retirement account.