Schumer Unveils New Bipartisan Legislation With Senator Santorum Establishing $500 Investment Accounts For Every Newborn Child In Upstate New York

As New Yorkers savings rates hit alltime lows, U.S. Senator Chuck Schumer today unveiled new legislation aimed to help families and young people save through individual investment accounts. Under the America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act of 2005, just introduced by a bipartisan coalition of Senators, every newborn child would have a savings account called a KIDS Account and given a onetime $500 contribution to be eventually paid back to the government.

This program is like Head Start for your piggy bank, Schumer said. One of the most amazing facts about our economy is that the vast majority of middle and workingclass Americans have no real assets beyond the value of their homes. We need to do more to help Americans save, both for continued education and for retirement, and we need to make it happen as quickly as possible for future generations. The ASPIRE Act will help all Americans do that by starting accounts at birth, and it will help moderateincome people build assets by providing a government match for part of their annual deposits.

According to recent reports, savings rates are at historic lows. The Bureau of Economic Analysis has revealed that the personal savings rate averaged 10.4% as a percentage of disposable income in the 1980s, but in 2003 it average only 1.4%, the lowest level since 1938. The average personal savings rate is now less than 2% of income. In addition, average credit card debt per household, according to AmericaSaves.org, has increased from about $2,250 in 1990 to almost $9,000 in 2002.

KIDS Accounts would be provided to every child born after December 31, 2006 and would provide children with a onetime $500 contribution. Children in households earning below the national median income will be eligible for a supplemental contribution of up to $500. The accounts will be supported by incentives designed to encourage savings, promote financial literacy, and expand assetbuilding opportunities.

Once established, families and others will be allowed to contribute additional resources into these accounts. The Senate bill allows for contributions up to $1,000 a year. These voluntary contributions will be aftertax and will not be tax deductible, but account earnings will be taxfree. To further encourage investment, children in households earning below the national median income will be eligible to receive a dollarfordollar match on the first $500 contributed to the account. The automatic initial government contribution of $500 must eventually be paid back.

Schumer today released a new analysis showing how much New York families in each county stand to earn from the KIDS Accounts over a 10year period. Specifically, Schumer found that over a 10year period:

" Families in the Capital Region could build assets of at least $64 million through KIDS Accounts.
" Families in Central New York could build assets of at least $60 million through KIDS Accounts.
" Families in the Hudson Valley could build assets of at least $173 million through KIDS Accounts.
" Families in the Rochester/Finger Lakes area could build assets of at least $80 million through KIDS Accounts.
" Families in the North Country could build assets of at least $34 million through KIDS Accounts.
" Families in the Southern Tier could build assets of at least $38 million through KIDS Accounts.
" Families in Western New York could build assets of at least $92 million through KIDS Accounts.

I look forward to working with my colleagues on the other side of the aisle to make this bill a reality, and help middleclass Americans build assets and savings instead of more debt, said Senator Schumer. The ASPIRE legislation, S. 868, was also introduced by Senators Rick Santorum (RPA), Jon Corzine (DNJ) and Jim DeMint (RSC) and has been referred to the Finance Committee, of which Senator Schumer is a member.

The ASPIRE legislation will establish the KIDS Account Fund within the Department of Treasury, which will be governed by a Board of Directors similar in structure to the Board that oversees the Thrift Savings Plan (TSP), the retirement program for federal employees. As with the TSP, investments will be managed by a private sector firm. After accountholders turn 18 they will be able to keep their accounts with this Fund or transfer them to a private sector Roth IRA provider or a Section 529 plan for postsecondary education.

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