Hidden Nook

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Saturday, March 19, 2005

Life Time Savings Accounts

[Media Source*]

(From Financial Planning.com)

No new News about Terri thus far (see Blogs for Terri for the latest updates) but in the meantime this is something that would be a bonus along side of Social Security Reform.

Two types of accounts are designed to be used together: lifetime savings accounts, aimed at boosting savings generally, and retirement savings accounts. A person could contribute $5,000 in after-tax dollars to each, for a total of $10,000 a year. Interest on the accounts earned cannot be taxed.

The accounts would have no income or age restrictions. For example, a family of four could save up to $40,000 a year. What's more, money could be withdrawn at any time from lifetime accounts.

These accounts are intended to replace your traditional IRA's, Roth IRA's, etc. because you would be able to withdraw the money (without penalty) any time that you desire. Although I would personally love to see Social Security Reform happen, this might be a solution the Democrats would accept (although with great ideas coming from these bloggers I doubt that the issue would die down easily).

(From Financial Planning.com-see source link)

"The lifetime savings account would be an excellent option for those currently eligible for individual development accounts to save money," Rep. Johnson said in a statement. "Lower-income Americans are sometimes just one paycheck away from bankruptcy, and an LSA would allow them to save for any of life's emergencies and needs in one account."

I agree. Coupled with Social Security Reform this could go a long way to helping many Americans get out of debt and towards a better life. Although their are arguments against these accounts (and one would wonder why) these are easily refuted when one looks at the benefits compared with a traditional IRA:
Now, let’s compare a traditional IRA to a Lifetime Savings Account. For an LSA, there are no income restrictions of any kind; in fact, I’m not required to have any income at all. It doesn’t matter whether I have any retirement plans. And as long as I am alive, there are no restrictions on when I can take out the money. And there are no restrictions on what the money can be used for. And I can place up to $5,000 in the LSA or, if I can convince my generous uncle, he can put the money in a plan for me or in a plan for my child (who doesn’t need to have wage income). And, now for the best part, every dime I take out of an LSA is tax-free. All earnings are tax-free! But, of course, I don’t get an income tax deduction for the money I put into an LSA. I wonder how many people would still prefer an LSA?

Now, how many taxpayers will put money into an LSA? Answer: Every taxpayer who wants to have any savings for any period of time will put money into an LSA. Yes, some may spend some of the money the next day. But one doesn’t have to be a genius to realize that it’s better to leave the money in the LSA as long as possible since all the earnings will be tax-free! Anyone who claims that the Lifetime Savings Account will not increase savings substantially is kidding himself. The real problem liberals have with LSAs is that that they will be so incredibly popular that virtually everyone will set them up! And since everyone would have LSAs, the politicians wouldn’t easily be able to take them away.

Although this hasn't been given much press attention (as Terri's life is on the line and Social Security is being debated in Congress) having such account would greatly benefit the average consumer as well as those in poverty. Those refuting this idea are either scared of change or simply do not desire people taking more control over their own money (as compared to the Government handling it "for you"). After all, you earned the money, wouldn't you know how to spend it better?

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By Darnell Clayton • 7:35 PM • Email Post • •


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