Can Spenders Become Savers?

Representive Rham Emanuel had an op-ed piece (subscription) in The Wall Street Journal last week. One sentence made me do a double take:

Every American who works ought to have the chance to save. But today, too many don't.

Huh? No chance to save? Chances are everywhere.

Some cities seem to have a bank branch on every corner. Bank of America alone has over 5,700 branches nationwide.

Online banks welcome anybody who'll have their paychecks deposited to their accounts, then offer enticing rates on CDs.

IRAs? If you'll agree to put aside $15 or $20 a month, a number of mutual fund companies will welcome you.

Workers who don't have access to 40-1(k) plans have access to IRAs, not to mention everyday savings accounts. Once savers have enough to invest, they don't even really need an IRA, not while the top tax rate on dividends and realized gains is only 15%.

By the way, where did the notion arise that people could not save and invest for the long term without using an account labelled "retirement?"

What Congressman Emanuel seeks, his column reveals, is more ways to make people into savers. That's a tall order.

Some people are born savers, and probably have IRAs.

Most people are spenders. They'd rather put $15 a month into iTunes and ring tones.

You may enroll spenders in 401(k)s or other retirement plans. But few will retire financially independent. They'll borrow from their 401(k)s first chance they get. And they'll cash them in, despite tax and 10% penalty, as soon as they change jobs.

Hoping to push a young adult toward saving rather than spending? Good luck! A guide Albert Crenshaw compiled for The Washington Post last year may help. See Simple Steps to Begin Investing.