By ThirdAge News Staff
October 26, 2010
IRA accounts would be automatically contributed to by low0income workers if banking regulator Michael Barr had his way. He said that he believes U.S. banking requires innovative approaches to involve low-income families in mainstream banking services. n a speech at the Corporation for Enterprise Development In Washington, Barr, the assistant secretary for financial institutions at the Treasury Department, said 9 million U.S. families "do not even have a bank account" and millions more were "under-banked."
As banking moves into the modern, digital age, "Low- and moderate-income households in the United States often lack access to basic, mainstream financial services," such as bank accounts or retirement programs, he said.
That puts families with no saved assets at risk when a crisis hits, Barr said.
Meanwhile, "Banks do need to be able to make a reasonable profit in this segment ... (However) there is a need to leap forward out of the current paradigm (and) that leap will be fueled by new product and service innovation," Barr said, touting a proposal to have low-income taxpayers have refunds go to "automatic IRAs" through payroll deductions.
In the proposal, where employees are offered no retirement plan at work, "unless the worker elects out ... the savings would be deposited into the worker's own IRA," he said.
To help push the program, employers would be given a temporary tax credit.
Barr said the new Consumer Financial Protection Bureau was designed, in part "to increase financial literacy," which was the first step toward helping "poorer families enter the mainstream financial community."