Are You Poor? It Doesn't Pay to Save.

Does saving really work for poor people? This study [pdf] from the National Center for Policy Analysis, a conservative thinktank, said no:

Low-income households face "astronomical" penalties for saving, according to the report by the National Center for Policy Analysis. For example, each $1 saved by a single mother earning $15,000 a year would cost her $2.60 in higher taxes and lost government benefits.

"We're constantly told that we need to save early and often to prepare for retirement," said Laurence Kotlikoff, professor at Boston University and author of the study. "Yet government policies tell low-income families, 'If you save for the future, you won't get our help today.' "


much of this info is incorrect. i worked at the Welfare Dept for years so i have some insight. in calif. you are allowed to have $2,000.00 in combined property. houses and much of a vehicles value are not counted. lots of people would like to save for retirement - but i don't believe that it's the government/taxpayers duty to support them while they sock away money. we stopped counted the value of life insurance years ago. as for the Earned Income Tax Credit (EITC) it's not that much of a loss. they say that the tax credit given for retirement savings is wiped away if you qualify for the EITC. not a big deal when those who qualify for the EITC get almost everything they paid in taxes back in their refund. not only that, there are trained people located at the Welfare Office to file their taxes for them to make sure they get every last cent. finally - in my 11 years determining eligibility to Cash Assistance and Food Stamps - not once, ever, did anybody ever have a retirement account that disqualified them from assistance.
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Thank you, Jodie. I am an Enrolled Agent/Tax Pro and you stated most all of what I was going to say. In addition, If any single or couple making less than $50K a year contributes to a retirement account, they get a 10% credit, up to $200 a year.
The National Center for Policy Analysis is not a "conservative think tank".
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At $15,000 a year, a single mother would be best served to invest in some type of personal property (e.g. house or condo) instead of retirement. That way she'll build equity that she can roll into a larger home, or retirement way down the line. At that income level, saving for retirement on top of rent/living expenses just isn't practical or advisable.
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NCPA is most definitely a conservative think tank, and it's also an industry front group, well established and fairly well know in Washington.

Its funders -- P&G, ExxonMobil, Scaife, Lilly -- are its message. Its board and staff are not only a who's who of the GOP, but of other conservative think tanks and front groups as well -- Hudson, Hoover, Heartland, etc.

A couple of minutes of googling comes up with enough evidence to convince anyone who could be convinced with evidence.
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David: and your point is?
Or is it just assumed in your post that conservatives and industry are just evil and spread false information for their own profit? Go take a long walk off a short pier, comrade...

So-called "saving" is a bad idea in most cases as it is better for people or businesses on any income level to plow a healthy percentage of profits back into investment, research and development. Any corporation or wealthy individual who has been around long enough and succeeded has done this as a matter of course.
The article and this discussion leaves aside the whole point about taxes and government intervention (read: profiteering) in financial transactions between entities.
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Nice, Becki. I guess you're the explanation for why the U.S. has record levels of personal, corporate and government debt.

Hope you learn to speak Mandarin - they're going to own us soon the way we're going.
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ok let me tell you, I am that single mother they are talking about. I have 2 teen boys, and i get no child support because there dad is a loser. But anyway, I make about 20,000 a year and I would love to save money but It is just Impossible! i get paid once a month and stuggle to just to make it till the end. How the heck can i save anything. I worked 3 jobs before and the stress just got to me so bad. The SO CALL HELP these people are talking about is crap. I get NOTHING. Beacause according to the welfare people i make to much money for a family of 3. Try feeding 3 people on 240 a month food allowance. it sucks. but i do it some how.
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