Why is this important?
For the last year, URSLA advocates have been talking about a proposal for the FAIR RETIREMENT REPORTING ACT.
WHY? If we don't start addressing this issue now, we, as a country, will experience a retirement shortfall tsunami that will dwarf the economic problems resulting from the 2008 economic crisis. It will bring back the types of problems experienced by our grandparents as a result of 1929.
HELPING PEOPLE WAKE UP TO WHAT IS IN FRONT OF THEM BEFORE IT IS TOO LATE, ENCOURAGING SELF SUFFICIENCY AND MAKING SURE PEOPLE HAVE THE ABILITY TO TRUST THAT THEY ARE NOT BEING FOOLED AGAIN.
Is there really a need for this kind of legislation? WHY IS PLANNING and Financial Literacy SO IMPORTANT? Answer: Because without knowledge people are apt to be influenced to spend money without thinking about it. We live in a society where we are all busy. We are too busy living our daily lives to take the time to plan. It is estimated that people take 5 times as much time in planning one major vacation than planning their financial future. For most individuals, without planning, there will be little time to take vacations in the future – the majority of time will be spent in figuring out how to survive daily.
It is not too late. The most important time to implement strategies to extend financial resources is a 20 year period – 10 years prior to 10 years after retirement. Without having a base understanding of what the future looks like, people tend to get in “over their head” and when they are ready to look, it may be too late.
Before you can solve a problem, you need to recognize it. At this point of time, money is a good incentive for people. If a person gets a credit for planning, they are more likely to plan. If they get a tax deduction for learning about how to understand or manage their financial resources, they are more likely to invest time into financial literacy.
People need to understand one basic rule. To retire you need to spend less than your income.
“A university study cited that the most important variable in predicting whether people would be able to maintain their standard of living during retirement was whether they currently are spending less than their income. The real challenge, thus, is getting people to take the first step by focusing on where they are right now. If that succeeds, the rest will fall into place.”
Education is key to staying out of the RETIREMENT SHORTFALL TSUNAMI. We have just experienced an economic crisis in this country. It will take each person to find the right solution to the problems this economic down -- that takes education and understanding the reality of your own situation.
People who have attended financial seminars, for example, had a net worth 20 percent greater than those who were complacent about money matters, according to “Financial Literacy and retirement Preparedness: Evidence and Implications for Financial Education,” a survey by Annamaria Lusardi of Dartmouth College and the Harvard Business School, and Olivia S. Mitchell, director of the Pension Research Council of the Wharton School at the University of Pennsylvania. Part of the 2 increase can be attributed to motivation --- the people who had attended seminars were more apt to want to save and invest. Most importantly, those who know the most about the workings of the financial markets are more successful in weathering the swings of the markets. Lusardi and Mitchell found that people who were literate in financial matters and who were self-identified as doing “a lot” of retirement preparation had a median net worth of $200,000 compared with $84,000 for those who planned “hardly at all.”
“Our review reveals that many households are unfamiliar with even the most basic economic concepts needed to make saving and investment decisions.” The authors said in their 2007 study. “Such financial illiteracy is widespread: The young and older people in the United States and other countries appear woefully under informed about basic financial concepts [like compounded interest and percentages], with serious implications for savings, retirement planning, mortgages and other decisions.
It is a documented fact that it is no longer your parent’s retirement mainly because you need to take care of your own retirement and something needs to be done with Social Security or the money in it will run out. As corporate America shifts more and more of the burden for funding retirement to ordinary citizens, economists are asking these types of questions.
• How do you get people who never have money left over at the end of the month to save even 5 percent of their income for their future?
• How can people who have little or no knowledge of investing in stocks and bonds increase the returns they get on the money they save? **
Consider this:
77,000,000 members of the baby boom generation are approaching retirement age and demographic data indicate that members of this generation can expect to live on average an additional 20 to 30 years after retirement
Just over half of all United States workers actively participate in tax-deferred retirement savings plans which are comprised of assets of nearly $5,600,000,000,000.
Congress has historically promoted policies that will encourage greater private savings for retirement, but has not devoted the same attention to developing policies that will help people manage the savings once they reach retirement age. This program helps people determine the wisdom of the strategies they are using.
Qualified retirement savings plans are the product of such policies and provide Americans with valuable resources for their later years. Non-qualified plans provide an additional retirement benefit. We all find there are great public servants out there but to make a difference for the average American, it is not about complicated legislation, it is about having a program that lets the individual easily measure what their real retirement status is so they can find the answer right for them. This act is about the individual, not some big plan that saves everyone. Each person is encouraged to play a part to save their own retirement.
We need to encourage people to become self sufficient. The commitment of Congress to creating incentives to promote private savings and to manage accumulated savings does not supersede the responsibility of Congress to reduce the national debt and bring the Federal budget back into balance. Failure to address long term savings issues will only serve to increase the strain on Federal programs such as Social Security, Medicare, and Medicaid.
The national debt and annual budget deficits pose a significant risk not only to national security but also to the long-term solvency of the Social Security and Medicare programs. Encouraging the prudent management of accumulated savings and personal responsibility for retirement income security will reduce the potential financial threat to well-established entitlement programs for senior citizens. The budget impact of this Act will be mitigated through the legislative process so that the enactment of this Act will not add to the $8.8 trillion national debt.
The Internal Revenue Service shall develop a seal which can be used only by financial service professionals. These certified professionals must have the qualifications necessary to give assistance in finding the number of years a person’s resources will last given their current investment pattern, spending pattern and date of retirement. To qualify under the act to serve as a retirement planning professional, the financial professional must use software which has minimum reporting benchmarks as determined by the IRS for forecasting to what age a person’s resources will last.
Readiness is defined as an understanding of the length of time an individual’s resources will last to cover the expenses they anticipate they will need to cover over the course of their lifetime. Any financial planning software approved by the IRS under this act shall contain inflation numbers simulated by actual historic numbers rather than inflation numbers based on assumptions entered by either the individual or the investment advisor. Any financial planning software approved by the IRS under this act must strap inflation information to the CPI for elderly (CPIE) during retirement years in the projection vs. using the standard CPI. Any financial planning software approved by the IRS under this act must maintain cross correlation between asset class ROI using historic data reflecting past historical performance for similar investments and pair this with inflation numbers. Only advisors accepting fiduciary duty will have the ability to give consumers a qualified receipt for the tax credit. In using software programs to give their advice, they must accept both fiduciary responsibility and sign a statement that the software they use meets the software requirements under this act. Upon receipt of payment for products and services qualifying under this act, the vendor or advisor will give a receipt with their IRS code to the consumer. Consumer will then use this code on their IRS form allowing them to receive the tax credit under this act.
PART OF THE BILL INSURES THAT THERE IS A BENCHMARK FOR HOW SOFTWARE AND INFORMATION PROVIDED BY FINANCIAL PROFESSIONALS IS CALCULATED SO THAT PEOPLE ARE ABLE TO SIMPLY FIGURE OUT WHAT THEIR RETIREMENT READINESS IS. The basic benchmarks must be met by software or financial professionals in order to have a code which allows the person they serve to get a tax credit. It stops the manipulation. Insures that information given to people is not manipulated in the three most important areas – inflation, investment return numbers and use of a consumer price index for the elderly (a more reliable benchmark of the impact of price increase during retirement). IT also links the inflation and investment return information to actual historic data so that there is a reality with the numbers. It allows everyone to work off a base number, a number that tells them that given what they are doing today, how they are saving today and how long they intend to work to what age their money will last.
Amends the Internal Revenue Code to create up to a $200 tax credit for individuals who take time to find out each year how prepared they are for retirement. The person actually gets a tax credit for seeing how prepared they are and how long their financial resources will last.
Amends the Internal Revenue Code to create up to a $600 tax deduction for financial litercy training.
Creates a system to pay for these tax credits and deductions through fees paid by financial professionals and financial software companies. Companies and professionals who provide this service will benefit from increased interest in their services due to increased need.
Provides benchmasks these companies and professionals must meet to insure unbiased forcasting and information.
Insures three important variabiables are included in the mix to meet IRS benchmarks. Approved software and programs need to demonstrate retirement numbers are reported fairly based on linked historic inflation and investment return numbers. Retirement cost of living numbers are based on the CPI for elderly vs the CPI.
Under this legislation the Internal Revenue Code shall be amended to allow a tax credit up to $200 a year for individuals for expenses incurred for professional services and planning software approved under this act by the IRS.
The Internal Revenue Service shall develop a seal which can be used only by financial service professionals. These certified professionals must have the qualifications necessary to give assistance in finding the number of years a person’s resources will last given their current investment pattern, spending pattern and date of retirement. To qualify under the act to serve as a retirement planning professional, the financial professional must use software which has minimum reporting benchmarks as determined by the IRS for forecasting self sufficiency of retirement planning for individuals who seek to measure his or her retirement readiness under this Act.
Any financial planning software approved by the IRS under this act shall contain inflation numbers simulated by actual historic numbers rather than inflation numbers based on assumptions enthem to receive the tax credit under this act.
For approved Financial Software and meetings with financial professionals qualifying under this act: Consumer receives federal tax credit up to $200 for purchase of software - may be combined with advisor fee. Advisors/financial professionals certified to run software meeting the act’s standards and qualified to give advice. Consumer receives federal tax credit up to $200 for advisor fee giving client the information regarding years resources will last (may be combined with software program). All these must meet requirements delineated in this bill.
Dollars charged by software companies or advisors to run the analysis and meet with individuals help pay for the tax credit program. While some people see this and say, “Why would a company want to do this” We see the reason as evident. Software is a highly profitable product and profit margins on software allow the companies to help fund this program. The increased sales of software will help offset the costs the company must provide to the IRS for being a software provider of the retirement readiness score. Financial professionals charging for the analysis of a person’s retirement readiness will find that a percentage of those individuals they see will want additional services. With the increased demand for professionals who help advise and educate people as to their retirement readiness and the possibilities of how their products and services can help extend retirement resource longevity, it is a small price to pay to the IRS for the increase in willing participants who want the service of qualified professionals.
Financial education is provided already in many schools and money is already dedicated to financial literacy from existing programs. The use of a tax deduction is a way to enhance what is already out there. Income to educational facilities or companies providing education is an end result, usually the dollars for this education pays for the salaries and materials directly with a lower profit margin than for people who could help in an advising capacity.
Under this legislation the Internal Revenue Code shall be amended to allow a tax deduction up to $600.00 a year for an individual’s education meeting existing or expanded standards of the National Endowment for Financial Education Jumpstart program.
Individuals attending this approved training will receive a tax deduction (without 2% AGI limit adjustment current in place for advisors fees in the current IRS statute) The income into the IRS to pay for this program will be provided by companies meeting these minimum benchmarks who hold these trainings
A yearly review conducted by the IRS will determine an increase or decrease in the percentages paid to the federal government by the three sectors providing services under this act.
We all know there is a need, now we need to convince Congress to pass this legislation. . To do that we need dollars, exposure and people talking to their legislators. Please help us by getting involved. See the projects tab to learn how to get involved in different projects and definitely sign up for our regular new alerts. Together we will make a difference.
tered by either the individual or the investment advisor. Any financial planning software approved by the IRS under this act must strap inflation information to the CPI for elderly (CPIE) during retirement years in the projection vs. using the standard CPI.
Any financial planning software approved by the IRS under this act must maintain cross correlation between asset class ROI using historic data reflecting past historical performance for similar investments and pair this with inflation numbers.
Only advisors accepting fiduciary duty will have the ability to give consumers a qualified receipt for the tax credit. In using software programs to give their advice, they must accept both fiduciary responsibility and sign a statement that the software they use meets the software requirements under this act. Upon receipt of payment for products and services qualifying under this act, the vendor or advisor will give a receipt with their IRS code to the consumer. Consumer will then use this code on their IRS form allowing