Policy Options to Promote Inclusive Asset Building Through Account-Based Systems

Through an array of policies and programs, the public sector plays a significant role in the expansion of wealth and its distribution. Yet federal policy has historically discouraged asset building among households with fewer resources. The unintended consequence of this approach is that it creates a disincentive to engage in the types of activities which can help a family move up and out of poverty, namely savings and asset building. Specific policy proposals aimed to help lower-income families save have received less support than those that benefit middle- and upper-income households, such as the creation of tax-preferred accounts (IRAs, 401(k)s, and 529 College Savings Plans). Developing more inclusive asset building policies will likely require the development of new accountbased structures and policy supports.

This paper discusses the rationale for devising asset building policies using account-based systems, presents a set of principles to guide the policy design process for constructing such a system, and critiques several promising policy proposals currently under consideration at the federal level which employ account structures, specifically proposals to create children’s savings accounts, individual development accounts (IDAs), and inclusive retirement savings accounts.

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