Tax Time Savingsfor all with U.S.Savings Bonds:Training Webinar
Why Saving MattersRole of Savings: “No one has ever spent his way• emergency reserves out of poverty.”• for “get ahead” investments (home, education, retirement) ~ Dr. Michael Sherraden• alternative to costly credit• provides sense of security, comfortProcess of Saving:• promotes thinking ahead, prioritizing• models behavior for kids• emotional payoff (pride, satisfaction)
But Saving is HardQ: How manyAmericans currently hold Challenges lower-income saversSavings Bonds? face:A: 55 Million.(That’s 1 in 6!) • Limited income – a minimum wage worker makes $14K a year. • Consumerism – pressure to buy is everywhere. • Family & friends – are often in need, creating pressure to share resources. • Few opportunities – most people save with structured help (e.g., 401(k) plans), but poor people get little or no such help.
With Help, Anyone can Save Tax Clients want toSome Examples: Save invested in a US $500• In one matched saving test: In one study, 49%4% Savings Bond at of • 2,300 people saved $1.3MM - 2.2% of for 10 years will grow VITA clients agreed: “I wish that when I had to $743.6 their income, an average of $550 cash, I was better • Almost half lived below poverty level; 4 in disciplined & saved it 5 lived below 2x the poverty line rather than spent it.”• In test of U.S. Savings Bonds: • 1,385 VITA tax clients (6%) saved $250k+ in bonds for 2,300 people • Buyers’ average income: $20K • Average amount saved: $192
A Quick Quiz…Low and moderate income tax filers receive howmuch money each year in federal tax refunds?• $100 million (average of $500 per household)• $1 billion (average of $1,000 per household)• $100 billion+ (average of $1,680 per household)
A Quick Quiz…Low and moderate income tax filers receive howmuch money each year in federal tax refunds?• $100 million (average of $500 per household)• $1 billion (average of $1,000 per household)• $100 billion+ (average of $1,680 per household) 7 • What might help people save some of these funds?
Tax Time Opportunity Assistance and guidance from aKey elements to foster saving: trusted tax preparer is• Funds to Save - $100 billion is returned to a critical to helping tax clients save at tax poor families each year time o On average, $1,680 per household o Up to 20% of annual income• Assistance – tax preparers can serve as trusted helper to suggest saving• Convenience – saving at tax time requires no 2nd step, extra trip to bank
Something to ConsiderFor many lower-income clients Buying $100 U.S. Saving Bonds every year for 20 years• tax season is the only chance each year would leave a tax client with when saving seems possible. over $3,000 – enough to fill• a tax preparer may be the only person the gaps in a child’s college scholarship. all year who asks them to think about saving. Most people won’t save unless someone asks them to consider it. VITA volunteers & staff owe it to their clients to raise this important topic.
A Proposition Did You Know?How about a “Return to Thrift”?• From 1917-1966, the culture that supports saving YMCA and others• more families with financial reserves sponsored “National Thrift• emphasis on the future, planning Week,” complete with local• “Thrift Captains” especially critical for working familiesBut How?• need a secure, trustworthy product• available to all, at key moments• long-term in nature• able to be gifted…
Another Quick QuizHow many Americans own U.S. Savings Bonds?• Over 1 million• Over 10 million• Over 50 million
Another Quick QuizHow many Americans own U.S. Savings Bonds?• Over 1 million• Over 10 million• Over 50 million • 55,000,000 Americans own savings bonds – 1 in 6!
Quick QuizHow many Americans own U.S. Savings Bonds?• Over 50 million • 55,000,000 Americans own savings bonds – 1 in 6!In the 1960s, tax filers could receive their federalrefund in the form of a savings bond.• True• False
Quick QuizHow many Americans own U.S. Savings Bonds?• Over 50 million • 55,000,000 Americans own savings bonds – 1 in 6!In the 1960s, tax filers could receive their federalrefund in the form of a savings bond.• True• False Yes! Here’s an example… 1962 Form 1040A With option to receive refund as U.S. Savings Bond
It’s easy to do on Form 8888Just complete Part II for U.S. .Savings Bonds • If bonds are for tax filer just complete Line 4 • If bonds are for others, complete Lines 5 and 6 o If beneficiary check box• Enter amounts on RHS
U.S. Savings Bonds Overview Series I U.S. Savings Bonds U.S. Savings Bonds an “IOU” from the US Government:have been a popular,respected investment • safe – principal protected by “full faith & option for over 70 credit of U.S. government” years. • accessible – buy for as little as $50 • smart – solid return (1.76%), no fees • simple – sold at “face value” ($50 buys $50 bond), rate adjusts twice a year • long-term – must be held for 1 year before “redemption” (cashing in) • portable – may be redeemed at most banks & credit unions
Important Bond FactsRedemption (“cashing in”) Proceeds from Savings• At most banks & credit unions Bonds are exempt from• Requires valid ID federal tax if used for secondary educationMinimum holding (check IRS Publication• Must be held for 1 year 970 for details).• If redeemed before 5 years, lose 3 months’ interestLoss / theft replacement• Complete Treasury Form PD F 4000 or Form PD F 1048• Get signature certification from bank• Mail to Treasury
Savings Bonds as Gifts In a 2008 study, 68% ofTax Clients can buy bonds for: buyers purchased savings• Themselves bonds for others, mostly children & grandchildren• And/or up to two other people• e.g., kids, grandkids, spouses, nieces / nephews, godchildren, etc.Details• Tax client needs only name of gift recipient (no SSN)• Client & gift recipient will be listed on bond as co-owners• Either party may redeem bond
Example Savings Bond Purchaser’s Social Security Number Issue Date 123-45-6789 01 2009 John Q. Saver 123 Main Street Anywhere, WA 99000-0000 OR Jen Saver FRB-MPLS 04-15-07 2 :C000090007 :04 000000000000 C000000000IOwner’s Name & Address (Co-Owner Name, if any) Authentication Stamp
Bond Features & Benefits Feature Benefits Competitive return (1.76% Reach saving goal sooner currently) No fees No fees to erode savings Convenient Simple tax site order process saves time Can buy for others Easy to give savings as a gift Inflation protection Value not lost as prices rise Loss & theft protection Savings are safe
Bonds vs. Savings Accounts or CDs Savings Bonds: CD-like returns, no fees and a $50 minimum Typical 1 Year Series I U.S. Typical Savings Certificate of Deposit Savings Bond Account* (CD)* Rate of Return .51% .80% 1.76% Annual Fees $0 $0 $0 Minimum to Open $100 $1,000 $50 Rate Fixed No Yes Adjusts bi-annually Minimum Holding Period None 1 year 1 year 3 months interest Early Redemption All interest earned to None (redemptions within 5 Penalty / Forfeiture withdrawal date years of purchase) ChexSystems Review Yes Yes No May Buy as a Gift No No Yes*Source: National Average rates, www.bankrate.com
And Another QuizWhich of the following are true about Series I U.S.Savings Bonds:A. They pay a competitive interest rate (1.76% currently).B. They can be purchased for as little as $50.C. They can only be redeemed where they were purchased.D. They can be purchased as gifts for anyone else – all you need isthe gift recipients name.
And Another Quiz Which of the following are true about Series I U.S. Savings Bonds: A. They pay a competitive interest rate (1.76% currently). B.They can be purchased for as little as $50. C.They can only be redeemed where they were purchased. D.They can be purchased as gifts for anyone else – all you need is the gift recipients name. All of these statements are true except letter C.U.S. Savings Bonds can be redeemed at most banks and credit unions nationwide, not just where they were purchased.
Yet Another QuizHow long must savings bonds be held beforethey may be redeemed?1. 6 months2. 12 months3. 5 years4. They may be redeemed any time
Yet Another QuizHow long must savings bonds be held beforethey may be redeemed?1. 6 months2. 12 months3. 5 years4. They may be redeemed any timeU.S. Savings Bonds must be held for at least 12 months before they may be redeemed. Bond buyers should understand that they can not access funds saved in bonds for one year after purchase.
Finding: People Want to Save• LMI tax clients value saving 49-63% of buyers saved part of refund in the past 48% of decliners• Saving is a growing concern
Finding: People Like Savings Bonds• Pleased with bond purchase• Familiar with bonds 65% of tax clients “familiar” (vs. 32% for IRAs) 63% of tax clients had bought bond, received bond as gift or known someone who has owned
Finding: Who Saves • Demographics Parents: 70-75% of buyers; grandparents: 4-15% Gender: 79% female Age: ~ 40 years, same as sample Income: average AGI of buyers ~ $20k Ethnicity: African American over represented among buyers; Hispanic slightly under • Other Large tax refund ($3.4k for buyers vs. $1.7k) First time savers: as high as 50%
Finding: Why People Save• Who: for kids & grandkids 70%+ of buyers bought for others 59% of buyers “I want to put something away for my kid’s future”• What: for education, retirement Children / family (27%), Education (23%), Retirement (18%)• Time horizon: long-term 2/3rds still saved after 3 years (in line with national average)
Finding: How People Decide to Save • When: at “point of sale” ~50% report deciding to save at tax site • How: human contact o “learned about option to buy bonds today…” 79%+ when someone talked to me 12% from brochure or poster 20% before coming to tax site
Presenting Savings 54% of bond purchasers during the TS ‘07 pilot, Consider As taxthey had no money said preparer, YOU play • Saving requires many tax clients to a “saved role in a client’s crucial or invested” prior take a “leap of faith” to buying bonds decision to save for the o What if they need the money later? Or future - their own, or that their savings disappear? of their children or grandchildren. • Clients generally trust you, their tax preparer or other VITA staff • You are there at the key moment – when the refund amount is clear As the face of any savings offer, your role is critical.
Bond Order Process How it Works 1. Client chooses to order bond in Part II of Form 8888 2. Government mails bonds to clients Your Role(s) 1. Explain opportunity - describe savings bonds & chance to order at tax site 2. Seek decision – ask client to decide if, howTax Preparers Matter much & for whom to order bondsIn a 2007 study, 41% of taxclients who saved part of 3. Process order – complete IRS Form 8888their refund decided to do and enter name of owner and co-owner(s)so only after meeting with or beneficiary and amount for bondstheir tax preparer.
Talking with Clients New Savers?Bonds are a good fit for… 54% of tax clients who bought savings bonds in• Parents / guardians – bonds are popular gifts 2007 said they had no for kids money “saved or invested” o 68% of ’08 buyers bought bonds for others prior to buying bonds.• First time savers – seeking a safe way to start saving o Bonds can be ordered for as little as $50• Long-term savers – who want a tool to build savings over time• People on ChexSystemsSM – who do not qualify for a bank account
Conversation Starters When a client speaks:To raise the topic of saving, tryopen-ended questions: • • Listen closely Look her in the eyes• I see you have a savings bond brochure; have you • Never interrupt had a chance to look at it – what do you think? • Consider repeating back her key points• We have a new, free service this year to help you save; have you heard about it – what questions do you have?• Have you ever heard of US savings bonds? What have you heard? –or- May I tell you about them?• Do you recall how you used last year’s tax refund? What are your plans this year?
Seeking A DecisionRemember: To help clients decide about • Saving is hard & many client’s won’t say “yes.” buying bonds: • It is normal for about 1 in 10 to order bonds. • Answer any questions; tactfully • Please keep asking clients correct any misinformation about bonds – even if • Briefly re-state 2 or 3 relevant bond many say “no.” • Always respect clients’ features choices, as they know o For example, “as I mentioned, what’s best for them. bonds are very safe, available for just $50, and earn 1.76% right now.” • Then ask directly, “would you like to order a savings bond today?” • If client declines o Politely ask them why o Correct any misunderstandings, ask again
Possible Client Concerns During 2007 & 2008Concern: I can’t afford to save pilots, bond purchases• Response used, on average, 6% of o Even a little is a start; you can begin for $50 their refund to buy o You just saved $150 in tax preparer fees - you savings bonds could save some of this amount o How did you use last year’s refund? Buy a $50 bond & you’ll still have some of your refund next yearConcern: I don’t trust the government• Response o 55 million Americans hold Savings Bonds o Savings bonds have been sold since 1934 o You trust the gov’t to send your refund o The same department that processes your refund issues bonds
Client Concerns (more) Q: Does one pay state orConcern: I’ll save by myself, my own way local Income taxes on • Response Savings Bonds? A: No. o It’s great you already have a plan to save! o We are offering another saving option that can save you time & a trip to the bank. o Bonds are among the safest saving options with very competitive returns. o You can buy a bond for your kids, grand-kids or others - bonds make great gifts. o For most of us, if we don’t do it now we may never do it. o It’s free to split your refund and buy a bond today.
Another OneWhich of the following are good ways to begin aconversation about savings bonds with tax clients?A. Do you want to buy a savings bond?B. Have you heard about our new saving option this year? What questions do you have?C. Has anyone talked with you today about savings bonds? What do you think about them?
Another OneWhich of the following are good ways to begin aconversation about savings bonds with tax clients?A. Do you want to buy a savings bond?B.Have you heard about our new saving option this year? What questions do youhave?C. Has anyone talked with you today about savings bonds? What do you thinkabout them?Both letter B & C are good conversation starters.They are open-ended, non-threatening and will help you learn moreabout the client’s thoughts and feelings.
Final QuizIf a client says “I’m not interested” which of thefollowing is the best way to respond?A.Fine. How do you want to receive your refund?B.Why? Savings bonds are a great way to save and saving is reallyimportant.C.Okay, that’s fine. Thanks for considering it. It would help me tounderstand why you aren’t interested – could you give me some idea?
Final QuizIf a client says “I’m not interested” which of thefollowing is the best way to respond?A. Fine. How do you want to receive your refund?B. Why? Savings bonds are a great way to save and saving is really important.C. Okay, that’s fine. Thanks for considering it. It would help me to understand why you aren’t interested – could you give me some idea?Letter C is the best response.It accepts the client’s answer but keeps the conversation going andprovides an opportunity to identify and correct any misunderstandingsabout savings bonds.
YOU can Encourage Savings HabitsDid you know?81% of those who bought PLEASE:savings bonds in 2007said they were very Ask every client who has a refundhappy with their • If you don’t, who will?purchase! • Tax time may be a client’s only feasible saving opportunity all year; it may be a year before they have another chance. • It never hurts to ask; you can’t be sure who will say yes unless you ask! • Everyone deserves a chance to decide for themselves.
“Savings is hard. Bonds make it easy”• Multiple dimensions: National vs. Local Offline vs. Online• Lots of outreach into the communities (consumers, gatekeepers, tax preparers)• Support of elected officials• Local media coverage; PSAs, etc.• Social media and campaign web site
Training Content and Delivery• One webinar / classroom Powerpoint presentation Why savings matters, savings bond features and how to present savings at tax time• Two video presentations: Role play video on how to offer / promote bonds to clients “Bond Stars” video – successful tips from star bond coordinators• Role play script for class room training• FAQs and Guides
Training Content and Delivery• Available for download on: www.bondsmakeiteasy.org/taxpreparers/training Please download and e-mail to other sites / organizations interested in training• Available for viewing, sharing with others, and downloading on Social Media sites: http://www.slideshare.net/bondsmakeiteasy http://www.scribd.com/bondsmakeiteasy Please view, read, share, comment, download, train!
Marketing / Communication materials• All available on http://www.bondsmakeiteasy.org/taxpreparers/materials • Communications toolkit • Outreach collateral Posters, flyers, buttons • Point of Sale collateral (for tax sites)
Join our Campaign – offline• Pledge to buy a bond in 2013• Promote it at your tax sites• Build awareness of the policy among your partners and networks o Include blurbs about the policy in your newsletters or e- mail blasts o Encourage public officials to publicize the new policy in constituent communications o Have public officials speak about the option o Work with employers and employee unions to promote the opportunity o Distribute Marketing / collateral (FREE download on www.bondsmakeiteasy.org/taxpreparers/materials
And Online• “Like” BondsMakeitEasy on Facebook o and share the campaign with your family, friends and colleagues: www.facebook.com/bondsmakeiteasy• “Follow” BondsMakeItEasy on Twitter www.twitter.com/bondsmakeiteasy.twitt• “View” and “Share” our videos on Youtube
Thank you!For more information:• visit: Doorways to Dreams (D2D) Fund at http://www.d2dfund.org/ and Bonds Make it Easy at http://bondsmakeiteasy.org/ o Preeti Mehta o firstname.lastname@example.org o (617)-541-9065• about Series I U.S. Savings Bonds, visit: o The Bureau of Public Debt at www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm