Q: What is National Save for Retirement Week?
A: Hard-working families who are hard-pressed to pay the bills and make ends meet may feel that putting away money for retirement is a luxury they can’t afford. The reality is that Americans can’t afford not to save, plan and invest for their future. Every little bit helps. For the last decade, Congress has designated the third week of October as National Save for Retirement Week to refocus the nation’s awareness about the importance of retirement savings. The personal savings rate in the United States has trended downward from an all-time high of 14.6 percent in 1975 to 5.3 percent in 2014, according to the U.S. Bureau of Economic Analysis. Although it’s easier said than done, breadwinners will be thankful for making financial sacrifices today so that they may be able to retire and enjoy a standard of living to which they are accustomed years after leaving the workforce.
As a federal policymaker, I’ve championed measures to make it easier for workers to feather their retirement nest while still earning a paycheck. The sweeping federal pension reform law I helped shepherd through Congress in 2006 improved retirement savings tools for workers. It promoted automatic enrollment in 401(k) and other defined contribution plans; expanded portability of retirement plan assets to recognize mobility in the job market; added new catch-up contributions to Individual Retirement Accounts for workers age 50 and older and increased contribution limits for IRAs (up to $5,000 indexed to inflation, or $5,500 in 2014) and defined contribution plans, such as 401(k)s (up to $15,500 indexed to inflation, or $17,500 in 2014); created a new savings vehicle for small employers, known as DB-k plans, that allows for the combination of a defined benefit plan and a 401(k) plan; and made permanent the saver’s credit for low-and middle-income taxpayers. It’s never too early to start saving for retirement security. At this time of year, as many workers take stock of their employee health and retirement benefits, take full advantage of workplace savings vehicles that will help steer more Americans to a stable, secure retirement.
Q: Why is it important for kids to learn the value of saving?
A: Today’s culture embraces instant gratification. Consumers are able to access a 24/7 news cycle and shop around-the-clock online. Advances in technology, transportation and telecommunications are accelerating expectations for immediate results. Even the end-of-the-year holiday season is encroaching earlier in the calendar year. The virtues of patience and self-discipline are being tested for younger generations. Big spenders in Washington have contributed to a mindset that undervalues the idea that good things come to those who wait. The nearly $18 trillion national debt says it’s okay to live high on the hog today. Let someone else worry about paying the bills later. This sends a reckless message. Setting goals and learning self-discipline are important assets to help build a good work ethic and foster self-esteem. This will help lead to success in school, relationships and careers. Building the foundation for financial success requires financial literacy for good money management. Starting with the basics, such as piggy banks and personal savings accounts, would give younger generations good head starts. Parents can help start good habits by putting a priority on saving. The earlier that kids learn to appreciate the importance of saving up for their future, the likelier they will become smarter spenders and borrowers. It will help younger generations afford big-ticket items on their bucket list of the American Dream, from higher education to home ownership. The sooner that members of younger generations appreciate the value of saving for their future, the better off they will be to achieve the promise of prosperity.
Q: What is the FDIC Youth Savings pilot program?
A: Congress established the Federal Deposit Insurance Corporation in 1933 to restore and promote confidence in the nation’s banking system. As the 2008 financial meltdown confirmed, the nation’s economy depends on financial institutions to operate with integrity and good stewardship. It’s important younger generations maintain trust in our banking and savings institutions. It’s even more important they appreciate the value of saving. To encourage principles of good money management and personal savings, the FDIC has launched a pilot program in which FDIC-insured financial institutions will partner with schools and non-profit organizations. The program will teach basic financial education and help school-aged children open up savings accounts. One community bank in Iowa, Treynor State Bank, currently is partnering with local schools to facilitate in-school banking programs, for example. The FDIC is looking to expand the effort during the 2015-2016 school year. Talk to your local bank about bringing the program to your town. Whether saving up for retirement, college education or a birthday present, teaching young people about the merits of saving is an invaluable gift that will keep on giving for generations to come.