Tax time savings with U. S. Savings Bonds

Tax time savings with U. S. Savings Bonds AARP Tax-Aide Webinar Presentation December 16, 2009

Agenda • Savings Bonds at tax time: the right product at the right time • The new policy • What can you do: Promote the new opportunity with taxpayers • Next steps, Q&A

A window of opportunityCurrent Alarming Facts: The U.S. personal savings rate dropped lower and lower for years - only increasing recently in the midst of a severe economic crisisDebt has grown – from 1994 to 2008, average family credit card debt doubled from $4.3k to $9.6kVulnerable are hardest hit – poorest 25% of families have negative net worth

“…We’ll make it easier for people to save their federal tax refunds, which 100 million families receive…You’ll be able to check a box on your tax return to receive your refund as a savings bond.” --Pres. Barack Obama, Sept. 5, 2009

What does this mean? • All Americans will have a safe and easy way to save at tax time • It has never been easier to save a portion of one’s refund • But this is just the beginning….

Why Savings Matters • Role of Savings • Emergency reserves • As an alternative to costly credit • For “get ahead” investments, such as homes, education, and retirement • For providing a sense of security, comfort • Process of Saving • Promotes thinking ahead, prioritizing • Emotional payoff (pride, satisfaction) • Models behavior for kids and grandkids

Consider that… • For many lower-income clients • Tax season is the only chance each year when saving seems possible • A tax preparer may be the only person all year who asks them to think about saving. • Most people won’t save unless someone asks them to consider it. • 1 in 6 Americans own savings bonds • Over 73% of bond purchasers and decliners reported that they had heard of Savings Bonds before coming to a pilot tax site. Buying $100 U.S. Saving Bonds every year for 20 years would leave a tax client with over $3,000 – enough to fill the gaps in a child’s college scholarship. At the end of World War II, January 3, 1946, the last proceeds from the Victory War Bond campaign were deposited into the U.S. Treasury. More than 85 million Americans — half the population — purchased bonds totaling $54 billion. Those incredible results, due to the mass selling efforts of helping to finance the war, have never since been matched. (Source: http://www.u-s-history.com/pages/h1682.html)

Our Opportunity to Help…. Key Opportunity Facts Funds to save - $100 BILLION in refunds is paid to lower income taxpayers each year On average, $1,680 per household Up to 20% of annual income Assistance – volunteer preparers can serve as trusted helpers to suggest savings Convenience – saving at tax time requires no 2nd step, extra trip to the bank

Our goals for today • Enlist your support to build awareness and drive take-up • Learn about the bonds and the process to purchase them • Find out about tools that will help you build awareness and promote bonds among your taxpayers

Highlights of the new policy • Bonds on tax form starting January, 2010 • Just enter account information on IRS Form 8888 (requires direct deposit) • Tax filers may buy bonds for themselves only for this first year • If joint return, bond in name of primary tax filer AND spouse • Series I paper savings bonds mailed to the purchaser’s address (on tax return) • $50 to $5,000 worth, in multiples of $50 • First $250 in $50 bonds; remainder in as fewest possible bonds • Announced for 2011: • Ability to buy bonds for others (co-ownership)

2010 Form 8888

U.S. Savings Bonds Pilots: 2007 - 2009 Scope and Key Findings Three year results 19 states, 25 VITA organizations and 27 H&R Block offices Three year take-up of 4 % to 6 % Average Buyer AGI - $20k They bought for thelong term: redemptions track national rates 90% would recommend bonds to friends and family Many were new savers Average amount saved was $192

Competitive return– Currently 3.36% Safe– principal protected by “full faith & credit of U.S. government” Low minimum – as little as $50 No fees – no fees to purchase or redeem bonds Convenient – can be purchased directly from federal tax return Indexed to inflation Promotes longer-term saving – bonds earn interest for 30 years Portable – may be redeemed after a year at most banks & credit unions with valid ID Protected from loss or theft – replaced by completing Treasury Form 1048 from the Bureau of Public Debt. Why (Series I) U.S. Savings Bonds?

Bonds vs. Savings Accounts or CDs Savings Bonds: CD-like returns, no fees and a $50 minimum

More on Series I Savings Bonds • Are purchased at face value • in $50 increments above $50 • Must be held for 1 year • Prior to 5 years, redemption carries a penalty of the preceding 3 months interest • Tax can be (and usually is) paid on the earned interest in the year bond redeemed • Interest rates change twice a year • On May 1st and November 1st • Once a Bond is ordered, it takes about 3 weeks to arrive in the mail. • If not received, taxpayers should go to: 1. “Where’s my Refund” on irs.gov or call the IRS at 1-800-829-1040 to check return status 2. Call the Savings Bonds Customer Service number at 1-800-245-2804

What you can do: Promote the new policy • Tell your taxpayers and volunteer colleagues • Integrate the message into your program and operations such as your trainings and local newsletters or emails • Encourage your local volunteer colleagues to watch a copy of the webinar on aarp.org/taxaide (only available for the next 15 days.) • If you run a site, encourage your client facilitator to have clients ask volunteers about bonds • Ask every taxpayer with a refund and direct deposit if they want to use part of the refund to buy a Savings Bond! • Build general awareness • In your local news stories/ads about the AARP Tax-Aide service • In your tax related presentations and interviews • In the AARP Tax-Aide poster with site information (D143)

Next Steps, Q&A • Visit www.d2dfund.org/taxtimebonds to download tools and resources you can use • Learn more about bonds at www.treasurydirect.gov • View additional information on www.aarp.org/tavolunteers

Thank you! AARP Tax-Aide www.aarp.org/tavolunteers www.aarp.org/taxaide 800-434-6027 D2D Fund www.d2dfund.org 617-541-9066

Tax time savings with U. S. Savings Bonds