Let’s Have the Discussion on Savings Now

To piggyback off my colleague David’s thoughts on older Americans and the mortgage mess, I believe the new AARP study provides an impetus for a national conversation about automatic savings as well as flexible savings.

The study indicates that the foreclosure rate for those aged 50 and older whose mortgage exceeds their home value is twofold the national average. I’ll leave it to my more seasoned and brilliant colleagues to muse about and craft solutions that help those in trouble now, but I do maintain that our long-term asset-building goals should remain at the fore. While the importance of fixing our regulatory structure and re-thinking the way we do business in the housing arena cannot be overstated, I feel that we can focus on proactive solutions that allow for greater financial stability in those age groups that are, unfortunately, disproportionately affected by this calamity.

First, we can expand the Saver’s Credit and make it refundable. This will not only help bridge the wealth gap, but could allow for greater wiggle room in retirement for lower-income seniors when it comes to financial recovery. In addition, it will provide today’s low-income workers and tomorrow’s retirees the opportunity to reap the benefits of tax-preferenced savings. Second, we can create a universal, automatic IRA for the nearly 80 million Americans who aren’t offered an employer-sponsored retirement plan. These two proposals, in tandem, could create enough of a dam of retirement security that today’s workers and tomorrow’s retirees are not washed out by the occasional (and devastating) financial crisis. Luckily, both of these ideas have been introduced in Congress and have acheived the ever-so-rare bi-partisan support.

If nothing else, this crisis also highlights the need for flexible, automatic savings. My colleagues in the Asset Building Program have developed an Autosave proposal that seems more than prescient given our current state, and provides an opportunity to save for those who would otherwise have nothing and might have to take out high-cost loans for emergencies.

The discourse of the past few days, weeks and months has centered on potential imminent action to prevent these crises from deepening. What should not be lost, however, is the need to make sure that when financial catastrophes hit, our instinct should be to make sure the most vulnerable (in this case, moderate and low-income seniors) have a little extra to stave off financial ruin in the future. That starts with savings, and it should start now.