A new bill with some big Democratic names behind it would create children’s savings accounts (CSAs) for every single child in America.
Today, Senator Bob Casey (D-PA) joined Senator Ron Wyden (D-OR), Majority Leader Chuck Schumer (D-NY), and Representatives Don Beyer (D-VA), Joyce Beatty (D-OH) and Suzan DelBene (D-WA) to introduce the 401Kids Savings Act.
Funds from the accounts could be used for post-secondary education, starting a business, buying a house, or retirement security. Along with introducing the bill, Casey also released a new report called “401Kids: Building Wealth for the Next Generation,” which delves into the proposal and examples of how CSAs are already working for kids in several states.
“A lack of income means you can’t get by, but a lack of wealth means you can’t get ahead,” said Sen. Casey in a Jan. 31 press release. “As American families grapple with rising costs, they deserve a way to save not just for their future, but for their children’s future. My 401Kids Savings Act would provide every child in this nation with the cushion they need to take risks and pursue opportunities to create generational wealth.”
Sen. Wyden, Chairman of the Senate Finance Committee, has long had a focus on retirement security issues.
“It’s hard to climb the economic ladder when you’re buried under student loan debt or held down by the rising cost of housing,” Wyden said. “Senator Casey’s bill is about restoring economic opportunity for young people with a smart approach that will give kids a brighter future, put families on stronger financial footing and pay dividends for our economy nationwide. I’m proud to come from a state that’s an innovator when it comes to helping working people save and build a nest egg, and Senator Casey’s bill is a great opportunity to build on that success.”
Senate Majority Leader Chuck Schumer added that for too many Americans, the promise of the American Dream seems out of reach. “The 401Kids Saving Act would invest in our nation’s youth and make it easier for future generations of children to build savings, escape poverty and obtain economic security,” Schumer said. “No one should miss out on the opportunity to go to college, own a home, or start a business because they don’t come from a wealthy family. This legislation would ensure that every child in America has much more ability to reach their full potential.”
How it would work
Based on local models around the Nation, the 401Kids Savings Act would create children’s savings accounts that would be built on state 529 college savings platforms and managed by state Treasurers.
Once the accounts are established for all newborns and kids under age 18, families, non-profits, employers, foundations, and others could contribute to a 401Kids Account which, starting at age 18, could be used for post-secondary education and training, a small business, a first home or retirement security.
While all families could contribute up to $2,500 per year to the accounts, only lower- and moderate-incomes families would receive direct federal support.
According to outside analysis by the Constellation Fund cited in Casey’s press release, for every dollar invested in 401Kids, society would receive at least $2.61 in benefits associated with increased income, improved health, additional tax revenues, and savings to other government sectors.
Casey’s report says a typical lower-income child could have over $50,000 in a 401Kids Account by age 18—saying it is “an ‘investable sum’ or ‘start-up capital’ that can give every child a fair shot at realizing the American Dream.”
Among 18 organizations listed as endorsing the bill are The Aspen Institute, Commonwealth, and Vestwell.
“Vestwell is proud to support the 401Kids Savings Act, led by U.S. Senator Bob Casey (D-PA) and U.S. Representative Don Beyer (D-VA),” Vestwell CEO Aaron Schumm told 401(k) Specialist. “This new bill compliments our mission of closing the savings gap and will help expand access to those previously excluded – children from families with limited resources. The 401Kids Savings Act has significant potential to change the lives of America’s youth and reduce financial inequity for future generations.”
Editor’s Note: This story has been edited since it was posted to add input from Vestwell’s Aaron Schumm.
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Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.