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Timothy Flacke D2D Fund, Inc. CFED Assets Learning Conference September 12, 2008

Timothy Flacke D2D Fund, Inc. CFED Assets Learning Conference September 12, 2008. Returning America to Thrift U.S. Savings Bonds at Tax Time. Agenda. Context Opportunity Challenge & An Idea Tax Time Tests What Now?. Where Are We?. Record Debt Ever Rising…. Sources:

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Timothy Flacke D2D Fund, Inc. CFED Assets Learning Conference September 12, 2008

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  1. Timothy Flacke D2D Fund, Inc. CFED Assets Learning Conference September 12, 2008 Returning America to Thrift U.S. Savings Bonds at Tax Time

  2. Agenda • Context • Opportunity • Challenge & An Idea • Tax Time Tests • What Now?

  3. Where Are We? Record Debt Ever Rising… Sources: Washington Post Federal Reserve Bank

  4. Where Are We? Savings Rate… At Historic Lows Source: Federal Reserve Bank

  5. Implications for Asset Building Field? • Our work is not yet done! • need greater than ever • face large, powerful forces • Need more, different strategies? • broad-based / universal • permanent • long-term • bold (but pragmatic) We need a compelling vision, a goal…

  6. “Return America to Thrift”* • Refocus our national values on saving, investing, restraint, sacrifice for the future • “Return” - idea with precedent, history; a restoration • “America”- everyone; for individuals and the nation • “Thrift” - a way of life, a value - not just a single act But How??? *See www.newthrift.org/ for more on “thrift”

  7. Agenda • Context • Opportunity • Challenge & An Idea • Tax Time Tests • What Now?

  8. Where to Begin? • To return America to thrift we need: • Scope • Universality • Permanence • Recurrence • Pragmatism • Where can we find these? How abouttax (refund) season? 138MM tax filers (2006) open to all Americans not going anywhere every year EITC, refunds already in place

  9. Perspective: • Annual AFI Appropriation? $24MM (06-08)* • Annual TANF Block Grant? $17B (06-08)* * Source: HHS / ACF (www.acf.hhs.gov/programs/olab/budget/2008/fy2008apt.htm) Tax Time Opportunity: How Big? • $250 billion each tax season • 107 million households • $115b to LMI (HH AGI <$40k) • 68 million households • on average ~ $1,679 • 4% of annual income • in some cases, $3,000+ • up to 30% of annual income $115,000,000,000 Source: IRS, tax year 2006 data (http://www.irs.gov/pub/irs-soi/06in33ar.xls)

  10. Promote - Examples: • Private Campaigns • Public Campaigns • Prompt - Examples • Training Volunteer Preparers • Commercial Preparers • Self Preparation Software Processing – Refund Splitting EASY IRA Tax Time Saving Framework 4 essential elements (4 “P’s”): Promote Inform clients of saving opportunity & rationale Process Facilitate investment of refunds into savings vehicles Product Provide clients a suitable, affordable place to save Prompt Present an actionable, compelling saving offer at key moment SAVE!

  11. Agenda • Context • Opportunity • Challenge & An Idea • Tax Time Tests • What Now?

  12. Persistent Challenge: Product • To save, everyone needs a “bucket” • Ideal characteristics? • appealing to clients • credible, good return, low risk, no fees • easy to explain • to tax payers, volunteers, staff • easy to process • no compliance issues, no required 3rd party • Other: • research shows too much choice overwhelms • simplicity easier to sell, easier to administer

  13. Bond Feature Low $50 minimum No credit screen Risk free principal Gov’t backed, no fees, good return (4.28%) No bank acct required Can save for anything Long-term orientation, access after 1 year A Built-to-Order Product? Barriers facing many first time, low-income savers & relevant features of U.S. Series I Savings Bonds Barrier • Small balances • Spotty (credit) past • Risk averse • Mistrust mainstream financial service firms • No bank account • Unclear goal(s) • Long-term goals & liquidity needs in tension

  14. Agenda • Context • Opportunity • Challenge & An Idea • Tax Time Tests • What Now?

  15. Tax Time Tests • Nice idea, but… • Does anyone want them? • Will it matter if they do? • Tax time “Refunds to Assets” pilots • TS07 – 4 VITA sites, 27 H&R Block offices • TS08 – 32 VITA sites • More on TS08 • 15 VITA organizations, 32 tax sites in 13 states • 25k+ tax clients (avg. AGI: $18k) offered bonds • processing & support from H&R Block Bank • orders via new web-based Bond Portal

  16. Findings: Who Buys How Much • Strong demand • 1,600+ buyers / 2,500+ registrants (TS07 & 08) • $300k+ saved • take up (VITA) • 6 - 9% (high of 17 / 23%) vs. 1.2% for CD • 38% 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

  17. 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%) More Findings

  18. Interpreting the Findings • We believe savings bonds: • resonate with target audience • high awareness, documented demand • fill unmet need • universally available, trustworthy, easy entry • facilitate long-term, goal oriented saving • for kids, education, stated intent to hold • “lure” people in to saving (habit) • evidence of first time saving • may foster pattern of saving (38% repeat rate) • at low cost to the gov’t BUT, this national asset is wasting away...

  19. Agenda • Context • Opportunity • Challenge & An Idea • Tax Time Tests • What Now?

  20. ATA A National Saving Plan? Tax (refund) Time... $100,000,000,000+ + U.S. Savings Bonds FORM 8888 + Refund Splitting... Spend Some Save Some

  21. But How? • Vision: a “bond in every pot” (at tax time) • 1: How much is my refund? • 2: How much should I save? • 3: Check off box • 3 phase strategy: • short-term - no cost changes • e.g., 6 mon min., ITINs, emergency redemptions • medium-term - low cost • e.g., bonds on F8888, restate marketing budget • long-term - moderate cost • LMI incentive or subsidy for bonds (e.g., Saver’s Bonus Act)

  22. Future Form 8888

  23. Idea Getting Traction • Legislative • New Saver’s Act • Saver’s Bonus Act • Press attention • Time magazine (July 17, 2008) • Money magazine (August, 2008) • The New York Times (July 31, 2008) • Jane Bryant Quinn on Bloomberg.com

  24. How You Can Help • Participate in TS09 Pilot • goal to expand pilot, focus impact • seeking large, committed VITA sites • RFP out now – due 9/19 • Talk to us if you are interested • Join bond advocacy group • help build awareness • issue requires grassroots, community support • See www.d2dfund.org/workinggroup Join Roundtable today to see Bond Portal, discuss RFP

  25. Questions / Discussion D2D Fund, Inc. www.d2dfund.org Timothy Flacke 617.541.9064

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