Did Anyone Catch The Tail-End of President Obama's Address?

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6 March 2009
UPDATE: I posted to the Celent blog while eating breakfast this morning on the West Coast. Evidently, great minds think alike, as the NYT also put out a related article today (I swear I didn't know the NYT piece was out). The NYT provided a much better description of USAs: http://www.nytimes.com/2009/03/07/your-money/07money.html?hp Last week, I'm sure that many of you watched President Obama's Address to the Joint Session of Congress (i.e., his de facto State of the Union Address). Toward the very end of his speech, the president made the following statement: "To preserve our long-term fiscal health, we must also address the growing costs in Medicare and Social Security. Comprehensive health care reform is the best way to strengthen Medicare for years to come. And we must also begin a conversation on how to do the same for Social Security, while creating tax-free universal savings accounts for all Americans." Tax-free universal savings accounts? Intrigued, I did some web research. Most details about universal savings accounts (USAs) originate from the early-2000's and suprisingly come from conservative/libertarian sources (e.g., The Cato Institute). The main components of proposed USAs include the following:
  • Eligibility for all U.S. citizens, regardless of employment status
  • A contribution limit of the greater of $10,000 or 50% of taxable income
  • Distributions can be made tax-free after 3 years
  • Savings can be invested in stocks, bonds, money market accounts, etc.
To put it simplistically, a USA is basically an un-shackled IRA, designed to ease the pain of the impending Social Security crisis. I can't help but think that President Obama "channeled" the Bush Administration when he mentioned USAs. Nonetheless, banks need to keep their eyes on any USA proposals, as there are certain to be implications and opportunities in terms of deposit growth, investment management, distribution tools (e.g., payment cards), customer service, reporting, etc. Interestingly, the health care policy space has proposals for its version of a USA; a Universal Health Account, or UHA. More on that in a future blog post...

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