All US children would have universal children’s savings accounts (CSAs) if a new law that was just introduced is approved. Senator Bob Casey (D-PA) and other legislators presented the 401Kids Savings Act. Every child under the age of 18 would have a 401Kids account created for them under the proposed law. State treasurers and 529 college savings platforms would be in charge of overseeing these funds.
All children from lower- and moderate-income households would be Eligible for US 401Kids Saving Act, and the accounts would be set up with direct federal assistance for those families. A growing number of legislators and supporters are endorsing the $500 Per Child Under New Bill. The account, will contribute to asset accumulation and offer families and children financial stability. The accounts might be used to fund a business venture, a college education, a home purchase, or retirement savings.
$500 Per Child Under New Bill
- Congress Democrats introduced the 401Kids Savings Act and it will automatically establish tax-advantaged accounts for eligible infants and children, with the goal of saving money for retirement, college tuition, launching a company, and first-time home purchases. The federal government would contribute to the funds annually and in matching trend. The law would allow state governments to automatically enrol kids in tax-advantaged CSA’s by amending Section 529 of the Internal Revenue Code, if it passes. In addition, it would mandate that the Secretary of the Treasury establish a Federal 401Kids Savings program by 2025 in order to provide support for kids residing in states without CSA program.
- The annual contribution ceiling for US 401Kids Saving Act would be set at $2,500 and would be adjusted for inflation. Contributions from state governments to these funds would be unlimited. Children in households with an AGI of $75,000 or less for individuals and $150,000 or less for those filing jointly would automatically receive $500 annually from the federal government. Contributions would then be phased out up to an AGI of $125,000 for individuals and $200,000 for those filing jointly. A $250 automatic payment plus a 100% matching contribution up to $250 would be made by the federal government to households who qualify for the EITC.
US 401Kids Saving Act
Sen. Bob Casey of Pennsylvania filed federal legislation to establish a national children’s account policy. With the ability to build assets for developmental needs like higher education, the $500 Per Child Under New Bill aims to empower all children especially those from LI families. Reducing wealth disparity in America is one of the main advantages of the 401Kids Savings Act. Young people from low-income homes are more likely to live in poverty and have less prospects for social mobility, according to studies.
By giving young people a way to save and invest for the future, the 401Kids Savings Act will help them a lot. In the struggle for financial stability for young people in the US, the 401Kids Savings Act represents a significant milestone. With the new accounts, everyone would have the chance to realize their full potential and a more fair playing field.
Who is Eligible for US 401Kids Saving Act?
According to the bill, state treasurers would be able to create the accounts under state 529 college savings schemes, and any kid under the age of 18 would automatically get a 401Kids Savings Account in their state of residency. Children living in that state would get an account through the U.S. Treasury if the state decided not to use that authority.
- The Savings Act is available to parents and households with annual incomes of $75,000 or less.
- To be eligible for the payment, the legal partners who are submitting the tax return jointly must have less than $150,000 in income.
- The kids must not be older than 18 years old.
- Sharing the documentation proving permanent residency is required.
- Those who are immigrants but have been in the country for more than 10 years will also need to provide documentation of their job history, place of residence, and number of years in the country.
401Kids Account: Bill to create savings accounts for every child nationwide
- A 401Kids Account can be funded by families, non-profits, employers, foundations, and other organizations once the accounts for all newborns and children under the age of 18 are established. At that age, the account can be used for retirement savings, small businesses, post-secondary education and training, first homes, and small businesses.
- A federal and state means test that determines eligibility for public program like Medicaid would not apply to 401Kids assets under $100,000 in order to shield the most vulnerable households from losing access to essential assistance.
- The US 401Kids Saving Act would further promote family saving by matching government contributions made on behalf of children from EITC-eligible households dollar for dollar, up to $250 annually. Federal deposits might total up to $1,000 per year for certain families.
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