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Tax Time Savings for All with U.S. Savings Bonds:Training curriculum

Tax Time Savings for All with U.S. Savings Bonds:Training curriculum

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    Impact al training11112010 Impact al training11112010 Presentation Transcript

    • Tax Time Savings for All Training Webinar November 11, 2010 2 p.m. EST Impact Alabama
    • A Savings Crisis
      • Some alarming facts:
        • Americans had stopped saving – in early 2008 our personal savings rate fell to just 0.1%.
        • Debt has grown – from 1994 to 2008, average family credit card debt doubled from $4.3k to $9.6k .
        • Inequality is high – the bottom 40% of Americans own 5% of the nation’s wealth.
        • Vulnerable are hardest hit – poorest 25% of families have negative net worth.
        • Finally, a window of opportunity to help people save again - the savings rate is creeping upward as a result of the recession
    • Why Saving Matters
      • Role of Savings:
        • emergency reserves
        • for “get ahead” investments (home, education, retirement)
        • alternative to costly credit
        • provides sense of security, comfort
      • Process of Saving:
        • promotes thinking ahead, prioritizing
        • models behavior for kids
        • emotional payoff (pride, satisfaction)
      “ No one has ever spent his way out of poverty.” ~ Dr. Michael Sherraden
    • But Saving is Hard
      • Challenges lower-income savers face:
        • Limited income – a minimum wage worker makes $15K 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.
      Q: How many Americans currently hold Savings Bonds? A: 55 Million. (That’s 1 in 6!)
    • With Help, Anyone can Save
      • Some Examples:
        • In one matched saving test:
        • 2,300 people saved $1.3MM - 2.2% of their income, an average of $550
        • Almost half lived below poverty level; 4 in 5 lived below 2x the poverty line
        • 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
      $500 invested in a US Savings Bond at 4% for 10 years will grow to $743. 6 Tax Clients want to Save In one study, 49% of VITA clients agreed: “ I wish that when I had cash, I was better disciplined & saved it rather than spent it.”
    • A Quick Quiz…
      • Low and moderate income tax filers receive how much 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 how much 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
      $100,000,000,000
        • What might help people save some of these funds?
    • Tax Time Opportunity
      • Key elements to foster saving:
        • Funds to Save - $100 billion is returned to poor families each year
          • On average, $1,680 per household
          • Up to 20% of annual income
        • Assistance – tax preparers can serve as trusted helper to suggest saving
        • Convenience – saving at tax time requires no 2 nd step, extra trip to bank
      Assistance and guidance from a trusted tax preparer is a critical to helping tax clients save at tax time
    • Something to Consider
      • For many lower-income clients
        • tax season is the only chance each year when saving seems possible.
        • a tax preparer may be the only person 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.
      Buying $100 U.S. Saving Bonds every year for 20 years would leave a tax client with over $3,000 – enough to fill the gaps in a child’s college scholarship.
    • It’s easy to do on Form 8888
      • Just 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
        • If beneficiary check box
      • Enter amounts on RHS
      .
    • A Proposition
      • How about a “Return to Thrift”?
        • culture that supports saving
        • more families with financial reserves
        • emphasis on the future, planning
        • especially critical for working families
      • But How?
        • need a secure, trustworthy product
        • available to all, at key moments
        • long-term in nature
        • able to be gifted…
      Did You Know? From 1917-1966, the YMCA and others sponsored “National Thrift Week,” complete with local “Thrift Captains” Sounds like U.S. Savings Bonds
      • How many Americans own U.S. Savings Bonds?
        • Over 1 million
        • Over 10 million
        • Over 50 million
      Quick Quiz
      • How 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 Quiz
      • How 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 federal refund in the form of a savings bond.
        • True
        • False
      Quick Quiz
      • How 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 federal refund in the form of a savings bond.
        • True
        • False
      Quick Quiz Yes! Here’s an example… 1962 Form 1040A With option to receive refund as U.S. Savings Bond
    • U.S. Savings Bonds Overview
      • Series I U.S. Savings Bonds
      • an “IOU” from the US Government:
        • safe – principal protected by “full faith & credit of U.S. government”
        • accessible – buy for as little as $50
        • smart – solid return (.74%), 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
      U.S. Savings Bonds have been a popular, respected investment option for over 70 years.
    • Important Bond Facts
      • Redemption (“cashing in”)
        • At most banks & credit unions
        • Requires valid ID
      • Minimum holding
        • Must be held for 1 year
        • If redeemed before 5 years, lose 3 months’ interest
      • Loss / theft replacement
        • Complete Treasury Form PDF 1048
        • Get signature certification from bank
        • Mail to Treasury
      Proceeds from Savings Bonds are exempt from federal tax if used for secondary education (check IRS Publication 970 for details).
    • Savings Bonds as Gifts
      • Tax Clients can buy bonds for:
        • Themselves
        • And/or up to three 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
      In a 2008 study, 68% of buyers purchased savings bonds for others, mostly children & grandchildren
    • Example Savings Bond John Q. Saver 123 Main Street Anywhere, WA 99000-0000 OR Jen Saver 123-45-6789 01 2009 FRB-MPLS 04-15-07 2 :C000090007 :04 000000000000 C000000000I Purchaser’s Social Security Number Owner’s Name & Address (Co-Owner Name, if any) Authentication Stamp Issue Date
    • Bond Features & Benefits Benefits Reach saving goal sooner No fees to erode savings Simple tax site order process saves time Easy to give savings as a gift Value not lost as prices rise Feature Competitive return (.74% currently) No fees Convenient Can buy for others Inflation protection Loss & theft protection Savings are safe
    • Bonds vs. Savings Accounts or CDs
      • Savings Bonds: CD-like returns, no fees and a $50 minimum
      *Source: National Average rates, www.bankrate.com Typical Savings Account* Typical 1 Year Certificate of Deposit (CD)* Series I U.S. Savings Bond Rate of Return .17% .53% .74% 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 Early Redemption Penalty / Forfeiture None All interest earned to withdrawal date 3 months interest (redemptions within 5 years of purchase) ChexSystems Review Yes Yes No May Buy as a Gift No No Yes
    • Another Quiz
      • Which of the following are true about Series I U.S. Savings Bonds:
        • They pay a competitive interest rate (.74% currently).
        • They can be purchased for as little as $50.
        • They can only be redeemed where they were purchased.
        • They can be purchased as gifts for anyone else – all you need is the gift recipient's name.
    • Another Quiz
      • Which of the following are true about Series I U.S. Savings Bonds:
        • They pay a competitive interest rate (.74% currently).
        • They can be purchased for as little as $50.
        • They can only be redeemed where they were purchased.
        • They can be purchased as gifts for anyone else – all you need is the gift recipient's 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.
    • Final Quiz
      • How long must savings bonds be held before they may be redeemed?
        • 6 months
        • 12 months
        • 5 years
        • They may be redeemed any time
    • Final Quiz
      • How long must savings bonds be held before they may be redeemed?
        • 6 months
        • 12 months
        • 5 years
        • They may be redeemed any time
      U.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
        • “ 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
      • Consider
        • Saving requires many tax clients to take a “leap of faith”
          • What if they need the money later? Or their savings disappear?
        • 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 .
      54% of bond purchasers during the TS ‘07 pilot, said they had no money “saved or invested” prior to buying bonds As tax preparer, YOU play a crucial role in a client’s decision to save for the future - their own, or that of their children or grandchildren.
    • Bond Order Process
      • How it Works
        • Client chooses to order bond in Part II of Form 8888
        • Government mails bonds to clients
      • Your Role(s)
        • Explain opportunity - describe savings bonds & chance to order at tax site
        • Seek decision – ask client to decide if, how much & for whom to order bonds
        • Process order – complete IRS Form 8888 and enter name of owner and co-owner(s) or beneficiary and dollar amount for bonds
      Tax Preparers Matter In a 2007 study, 41% of tax clients who saved part of their refund decided to do so only after meeting with their tax preparer.
    • Talking with Clients
      • Bonds are a good fit for…
        • Parents / guardians – bonds are popular gifts for kids
          • 68% of ’08 buyers bought bonds for others
        • First time savers – seeking a safe way to start saving
          • Bonds can be ordered for as little as $50
        • Long-term savers – who want a tool to build savings over time
        • People on ChexSystems SM – who do not qualify for a bank account
      New Savers? 54% of tax clients who bought savings bonds in 2007 said they had no money “saved or invested” prior to buying bonds.
    • Conversation Starters
      • To raise the topic of saving, try open-ended questions:
        • I see you have a savings bond brochure; have you had a chance to look at it – what do you think?
        • 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?
      • When a client speaks:
      • Listen closely
      • Look her in the eyes
      • Never interrupt
      • Consider repeating back her key points
    • Seeking A Decision
      • To help clients decide about buying bonds:
        • Answer any questions; tactfully correct any misinformation
        • Briefly re-state 2 or 3 relevant bond features
          • For example, “as I mentioned, bonds are very safe, available for just $50, and earn .74% right now.”
        • Then ask directly, “would you like to order a savings bond today?”
        • If client declines
          • Politely ask them why
          • Correct any misunderstandings, ask again
      • Remember:
      • Saving is hard & many client’s won’t say “yes.”
      • It is normal for about 1 in 10 to order bonds.
      • Please keep asking clients about bonds – even if many say “no.”
      • Always respect clients’ choices, as they know what’s best for them.
    • Possible Client Concerns
      • Concern: I can’t afford to save
        • Response
          • Even a little is a start; you can begin for $50
          • You just saved $150 in tax preparer fees - you could save some of this amount
          • How did you use last year’s refund? Buy a $50 bond & you’ll still have some of your refund next year
      • Concern: I don’t trust the government
        • Response
          • 55 million Americans hold Savings Bonds
          • Savings bonds have been sold since 1934
          • You trust the gov’t to send your refund
          • The same department that processes your refund issues bonds
      During 2007 & 2008 pilots, bond purchases used, on average, 6% of their refund to buy savings bonds
    • Client Concerns (more)
      • Concern: I’ll save by myself, my own way
        • Response
          • It’s great you already have a plan to save!
          • We are offering another saving option that can save you time & a trip to the bank.
          • Bonds are among the safest saving options with very competitive returns.
          • You can buy a bond for your kids, grand-kids or others - bonds make great gifts.
          • For most of us, if we don’t do it now we may never do it.
          • It’s free to split your refund and buy a bond today.
      Q: Does one pay state or local Income taxes on Savings Bonds? A: No.
    • Quiz
      • Which of the following are good ways to begin a conversation about savings bonds with tax clients?
        • Do you want to buy a savings bond?
        • Have you heard about our new saving option this year? What questions do you have?
        • Has anyone talked with you today about savings bonds? What do you think about them?
    • Quiz
      • Which of the following are good ways to begin a conversation about savings bonds with tax clients?
        • Do you want to buy a savings bond?
        • Have you heard about our new saving option this year? What questions do you have?
        • Has anyone talked with you today about savings bonds? What do you think about them?
      • Both letter B & C are good conversation starters.
      • They are open-ended, non-threatening and will help you learn more about the client’s thoughts and feelings.
    • Final Quiz
      • If a client says “I’m not interested” which of the following is the best way to respond?
        • Fine. How do you want to receive your refund?
        • Why? Savings bonds are a great way to save and saving is really important.
        • 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?
    • Final Quiz
      • If a client says “I’m not interested” which of the following is the best way to respond?
        • Fine. How do you want to receive your refund?
        • Why? Savings bonds are a great way to save and saving is really important.
        • 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 and provides an opportunity to identify and correct any misunderstandings about savings bonds.
      • PLEASE:
      • Ask every client who has a refund
        • If you don’t, who will?
        • 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.
      YOU can Encourage Savings Habits Did you know? 81% of those who bought savings bonds in 2007 said they were very happy with their purchase!
      • Multiple delivery mechanisms for training, marketing materials (if you’d like them)
      • Social Media
        • Facebook, Twitter
        • Slide Share (for collaborative development, comments)
      • Download via web site
      • Call to action (Join our campaign)
        • Let us know what assistance you need (marketing, training)
      Technical Assistance Delivery
    • Join our Campaign
    • Thank you!
      • For more information:
        • visit: Doorways to Dreams (D2D) Fund at www.d2dfund.org
          • Preeti Mehta Joanna Smith-Ramani
          • [email_address] [email_address]
          • (617)-541-9065 (857)-753-1892
        • about Series I U.S. Savings Bonds, visit:
          • The Bureau of Public Debt at www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm