Individual Development Accounts: Opportunity for the U.S. Disability Community
By Dede Leydorf, World Institute on Disability (dede@wid.org)
People with disabilities need not be on the economic fringe - individual development accounts (IDAs) offer new hope for the economically disadvantaged to buy a home, start a business and to go back to school. In January 2002 at the Ninth Annual Economic Development Summit in Oakland, California, the USA's leading financial advisor, Alan Greenspan, spoke supportively of IDAs:
"Community organizations have collaborated with their partners in government and the private sector to design innovative mechanisms for saving. One such vehicle is the individual development account, which state and federal government agencies have embraced as a means for facilitating savings for lower-income households. ...Besides providing a structured account that offers a high incentive to save, individual development account programs require participation in financial training to help individuals continue on the path of economic betterment."
Example
Marian, a current IDA participant, found a new lease on life by taking control of her finances and setting realistic goals for her future. At the age of 59, Marian was a divorced single mother, with multiple disabilities including: bipolar disorder, migraines, severe arthritis, a hearing disability, obesity and fibromyalgia, living in public housing and receiving Temporary Assistance for Needy Families (TANF)--a federal program that requires work in exchange for a limited time public assistance benefit. Feeling she had nothing to lose, she "went for broke" to try to secure the type of life she felt she deserved. Five years later, with the help of an IDA program, Marian is well on her way to economic independence and will soon be off public benefits altogether.
Accommodation
Part of Marian's journey involved serendipitously discovering a previously undiagnosed disability. While accompanying a family member to Riverside Community College, Marian learned of their disabled student services center, where she was later tested and diagnosed with a learning disability. Marian found that for the first time in her life she could not only succeed, but could excel in college with a simple university-provided accommodation of note-taking. Marian explained, "By receiving the right accommodation and by learning about my disability, I realized this had been the problem all along." Marian is now actively pursuing a Bachelor's Degree in Solution Focused Brief Family Therapy.
One year later Marian began participating in the Family Self-Sufficiency Program (FSS) that allows her to apply any increase in her employment income to an "escrow account" for the purchase of a home, instead of increasing her rent accordingly. FSS referred Marian to the Riverside County Department of Community Action IDA program; in turn Marian gained access to an array of opportunities.
Tools
The IDA program gave Marian the tools and support to secure economic independence. When asked what the best part of the IDA program is for her, Marian responded, "The money is nice, but the workshops are unbelievable. They are geared to helping people learn how to have the life they really want. The workshops help you to use your money wisely so you can use your income to the greatest advantage." Marian was encouraged to attend any workshops that interested her, which included classes in financial management, homeownership and self-employment. Marian is now inspired to start two businesses -- a nonprofit organization to help low-income individuals access resources for assets development, plus a for-profit business providing workshops on stress reduction. Marian said passionately, "The first step was just knowing what I want. Next was the willingness to do whatever it takes to get it. I have experienced regeneration, which is taking what you have within and recreating it."
Poverty
Marian is one example of a person who is maximizing her economic potential by participating in IDAs. IDAs are the best kept secret in economic development programming at large and could be a boon for people with disabilities. People with disabilities remain among the most economically marginalized populations in United States. Over one-third of adults with disabilities live in households with an income of $15,000 or less compared to only 12% of those without disabilities. Furthermore, according to the 1995 Current Population Survey, 39.7% of working age adults with disabilities live in poverty. With approximately 52.6 million of Americans living with some level of disability, the potential for participation in IDAs by this subgroup is remarkable.
Incentives
IDAs provide a saving incentive through the provision of a 1:1 to a 1:9 match. Research and experience has found that providing a match is a greater incentive for saving among lower income populations then the more traditional tax relief that is geared to the middle and upper class. Combining this savings incentive with community support and financial training, IDAs give participants a new orientation for their future. Michael Sherraden, the father of IDAs, claims, "Most people who leave poverty -- or to use another vocabulary, most people who develop economically -- do so because they save and invest in themselves, in their children, in property, in securities, or in enterprise to improve their circumstances."
Thus far, 36 states in the U.S. either have laws supporting the development of IDAs or legislation pending to do so. Furthermore, recent changes in federal policy now enables those receiving Supplemental Security Income (SSI) to participate in IDAs without losing their benefits or Medicaid. In essence, the savings, the match and interest are excluded as a resource when determining asset limits. Specifically, an SSI beneficiary can participate in Assets for Independence Act or TANF federally funded IDA programs.
Empowerment
Marian summarized the feeling of empowerment she received through the IDA program best when she said, "An IDA program is like a tree. The trunk is the foundation that includes the agencies, the banks and the program. The branches are the workshops and all of the learning possibilities that are free of charge. Finally, at the end of the branches are the fruit, which resemble the future and all of the things that you want. I plan to climb that tree and grab that fruit."
Resources for information:
The World Institute on Disability provides training and technical assistance on IDAs and disability related issues. For more information contact Dede Leydorf via email: dede@wid.org.
For more information on Individual Development Accounts, visit the Corporation for Enterprise Development on the web: http://www.cfed.org
To locate IDA providers in the United States on the web: IDA Network.
For more information on disability issues relating to IDA accounts, check out: World Institute on Disability: IDA Section.
For more information on the Family Self-Sufficiency Program, go to: Housing and Urban Development.
For questions on how IDAs affect benefit eligibility, go to:
Center on Budget Priorities, for the article, "How Do IDAs Affect Benefit Eligibility"
World Institute on Disability, for the "IDA Fact Sheet: Policy Implications".
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