timothy flacke d2d fund, inc. cfed assets learning conference september 12, 2008

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

AgendaAgenda

ContextContext

OpportunityOpportunity

Challenge & An IdeaChallenge & An Idea

Tax Time TestsTax Time Tests

What Now?What Now?

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…

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

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……

““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”

AgendaAgenda

ContextContext




What Now?What Now?

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

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)

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

AgendaAgenda

ContextContext




What Now?What Now?

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

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

AgendaAgenda

ContextContext




What Now?What Now?


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

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

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%)

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...

AgendaAgenda

ContextContext




What Now?What Now?

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

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)

Future Form 8888Future Form 8888

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

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

Questions / DiscussionQuestions / Discussion

D2D Fund, Inc.www.d2dfund.org

Timothy Flacke617.541.9064

timothy flacke d2d fund, inc. cfed assets learning conference september 12, 2008

Documents