U.s. Ira System And Its Implications For China

Since 1960's, inflation and public financial deficits have broughtheavy burden to old-age security system allover the world. The globaleconomy growth slowed down after year 1970. Meanwhile, world-widepopulation aging brought heavy public pressure to all countries.Accordingly, how to design a suitable system of retirement incomesecurity became the most critical task of all governments. In 1974,American government created the Individual Retirement Accounts(IRAs),which was an individual saving plan of retirement for all the tax-payers.IRA offers tax preference to its participant if he obeys to all the rules ofIRA. Nowadays, IRA is one of the most important retirement incomesources of Americans. According to United Nations' definition of aged population, Chinahas stepped into old-age society since year 2000. However, our old-agesecurity system cannot afford enough retirement income security for theold population. Hereby, we should create our own Individual RetirementAccounts. Besides, the competition among China's commercial banks hasbecome more and more fierce. Traditional business cannot supply enoughprofit for commercial banks, while IRA-related business may increaseintermediary business income of commercial banks. Based on all thesefacts, this thesis thoroughly researches on the origin, development,characteristics and operating system of IRA. At last, this thesis exploresthe future outlook of IRA in China combining with the situation of China. This thesis consists of four chapters. The first chapter analyzes the background of IRA's emergence in theUnited States. At first, this part reviews all the social and economicfactors before IRA emerged and comes to the fundamentally factorsinducing the emergence of IRA. After that, this part introduces theretirement plans in 1970's and discloses its shortages, which leads us tothe institutional reasons to create IRA. The analysis tells that IRA'semergence is not by accident, but caused by economic background at thattime. Firstly, the old-aging population, increasing medical treatmentpayout and the lower saving rates per capita brought tremendous pressureto old-age security system. Secondly, the development of U.S. after WorldWar II made the Americans have the ability to set up IRA. Lastly, theAmericans couldn't afford the increasing taxes, so the best way to solveproblems was to stimulate saving by tax preference. Considering theinstitutional causes, the system of retirement income security at that timehad some disadvantages, which made the emergence of IRA be necessity. The second chapter deeply analyzes the running mechanism andmanagement of IRA, so as to find out the reason why IRA is so popular inthe U.S. On briefly introducing the origin and development of IRA, thispart analyzes its characteristics and effects. After that, this part finds outwhy the IRA can supply retirement security from the view of designingmechanism. At last, this part introduces the sorts of IRA and theirdifferences. The analysis tells that IRA is a kind of savings account onpurpose of secure life after retirement. It's alike both of traditionalsavings accounts and other retirement plans, but indeed, there areessential differences between them. We can see that the amount of IRAhas been going up in a long period of time, although the savings rate stillkeeps low in U.S. It has something to do with the policy, but what is moreimportant is due to IRA's own characters, which include restrictions oncontributions, maximum contribution, tax deductions and so on. The third chapter researches on the influences of IRA to financialsystem. At first, this part analyzes the inter-influences between IRA andfinancial markets based on historical statistics. Then, it focuses oncommercial banks and discusses the status of IRA in Americancommercial banks. We can see from the analysis that there areinter-motive relations between IRA and financial markets. On the onehand, IRA needs financial institutions and financial market to help itincrement. On the other hand, IRA can bring stable funds to financi...