Bill Would Give Kids a Head Start in Saving for Retirement

A powerful group of lawmakers has introduced legislation to help children start saving early for retirement by establishing a savings account for every child in America. 

The bicameral 401Kids Savings Act was introduced Jan. 31 in the Senate (S. 3716) by Sen. Bob Casey (D-Pa.), along with Senate Finance Committee Chairman Sen. Ron Wyden (D-Ore.), and Majority Leader Chuck Schumer (D-N.Y.). In the House, the bill (H.R. 7162) was introduced by Reps. Don Beyer (D-Va.), Joyce Beatty (D-Ohio) and Suzan DelBene (D-Wash.).  

The 401Kids Savings Act would create children’s savings accounts (CSAs) that would be built on state 529 college savings platforms and managed by state Treasurers, similar to local models around the nation, according to the sponsors. 

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 savings. 

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, Sen. Casey noted in a release. 

Along with introducing the bill, Sen. Casey released a 43-page report—401Kids: Building Wealth for the Next Generation—which details how 401Kids would work, explains why the legislation is needed and provides examples of how CSAs are working for kids in several states. 

In addition, the senator points to an outside analysis by José Diaz, Chief Economist at the Constellation Fund, contending that 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.”

“As American families grapple with rising costs, they deserve a way to save not just for their future, but for their children’s future,” Sen. Casey stated in introducing his bill. “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.”

“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,” added Sen. Wyden. “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.” 

The legislation was referred to the House Ways and Means Committee, and Energy and Commerce Committee in the House, and the Senate Finance Committee in the Senate. The text of the bill was not immediately available. 

Among the 16 organizations endorsing the legislation included The Aspen Institute Financial Security Program; Commonwealth; and Vestwell.