Administration Proposing New Savings System

An administration-backed initiative has been introduced in Congress that would simplify the nation's savings system by consolidating certain retirement, education, and other savings accounts.

Sen. Craig Thomas introduced the SAVE Initiative on March 8. It creates three levels of savings: Lifetime Savings Account (LSA), Retirement Savings Accounts (RSA), and Employer Retirement Savings Accounts (ERSA).

LSAs and RSAs would each have a $5,000 annual contribution limit for funds into an account that could accumulate interest tax-free. Like the Roth IRA, the LSA and RSA contributions are not tax deductible. However, in the case of LSAs, money could be withdrawn without additional taxation or penalty at any time for any purpose. RSAs could be withdrawn after age 58 or in the event of death or disability. In addition, the two accounts are available to all individuals with no income or age limits.

The ERSA account system is a consolidation of the various employer savings retirement accounts such as 401(k); 403(b), Governmental 457, SARSEPs, and SIMPLE IRAs.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 3, 4/05