FROM THE OFFICE OF PUBLIC AFFAIRS
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March 8, 2005
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Treasury Secretary John W. Snow
Prepared Remarks:
Press Conference on the SAVE Initiative
Senator Thomas, Congressman Johnson, it's an honor and a pleasure to be here with both of you to talk about the ways in which we can make it easier for Americans to save for the future.
Government has a tendency to make things overly complicated in spite of the best of intentions. As a result, Americans have any number of savings and retirement investment account options to choose from, but their variety and complexity make them confusing in a way that is actually a disincentive for savings.
From 401(k)s and SIMPLE 401(k)s to IRAs and Roth IRAs, 403(b)s to 457s and so on... savings vehicles have become an intimidating kind of alphabet soup.
Americans don't need to - and shouldn't - live in an environment where they need a financial advisor to participate in tax-preferred savings. There is a way for government to encourage and reward savings that is much easier to understand, and opens the door to a financially secure future much wider.
The three types of savings accounts we are talking about today have the potential to push that door open, wider than it's ever been.
By simplifying the tax incentives and penalties and dividing the accounts logically by their funding and use, LSAs, RSAs and ERSAs will make savings more approachable and more manageable for all Americans, and this is an extremely important goal.
Combined with already-allowable Health Savings Accounts, these new savings accounts would create a commonsense approach that Americans could use to save and plan for future expenses, both expected and unexpected.
HSAs are already helping Americans take charge of their own health-care because individuals own the accounts and are empowered to play a greater role in their health care decisions. Rather than a third-party insurer being involved for routine, lower-cost medical care, HSAs are giving patients choice and control over their own health care decisions while also allowing them to save for future, unanticipated health care needs, or, if unused, to pass on to their heirs.
RSAs would improve and simplify savings opportunities by consolidating the various existing, often confusing, IRA options. Contributions of up to $5,000 per year in each would accumulate tax-free and distributions after age 58 would be tax-free as well. Everyone would be eligible to save in an LSA for any purpose, regardless of their income. Nothing is more simple than this. And, like HSAs, with both LSAs and RSAs, you own the account, you make decisions about the account, and you can pass it on to your heirs.
While RSAs consolidate and simplify individual retirement savings options, ERSAs do the same for retirement savings plans offered by employers to employees. This is the world of 401(k)s, thrifts, 403(b)s, etc. Again, this is a chance for at-work savings to be more accessible and simpler, and I am particularly excited about the increased ease they would offer to small-business owners.
Since small businesses employ more than half of all private-sector workers, it is very important that we make establishment and management of employer-sponsored retirement savings as straightforward and effortless as possible. Small employers often cannot hire accountants or Human Resources staff, so making setting up plans simpler should make providing retirement savings options available to their employees much easier.
The President has said that saving is the path to independence for Americans in all phases of life, and we must encourage more Americans to take that path. He has backed up those words with specific proposals and support for legislative plans like the SAVE Initiative. The high priority of creating these savings plans is also reflected by their inclusion in the President's FY 2006 budget.
As you all know, the President and his administration are also actively touching the "third rail of politics" by supporting meaningful, lasting reform of our nation's Social Security system. Here, too, we see the President's passionate belief that personal savings and ownership is the path to independence. It's why he advocates the creation of personal savings accounts as part of overall Social Security reform.
The President and I believe that enabling younger workers to build a nest egg is an important, integral part of any change to Social Security, because the future of the system must be different for younger generations. Our country's demographics make the current pay-as-you-go system unsustainable, period.
Giving young workers having the ability to invest and build a better retirement for their future costs the Social Security system nothing to do so, will cost current and near-retirees nothing, gives our children and grandchildren a better retirement, and helps our country create a larger pool of savings. And as the president has said, the retirement security of our young people is too important for partisan politics. Why wouldn't we do this? I have not heard one good reason not to and I can't figure out why anybody would oppose it.
Similarly, I cannot imagine why anyone would oppose the commonsense, simpler approach of LSAs, RSAs and ERSAs. This initiative has the full support of the President, and I look forward to the day when all Americans can save more, and save more simply.
Thank you.
A fact sheet on the President's savings proposals is attached.
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REPORTS