I’ve always thought that we should offer some kind of a credit to parents to invest in a retirement account for their kids.
Parents could do savings, but in the USA a “retirement account” is usally defined by an IRA or 401k. For an IRA, there’s actually no age restriction, but the person must have earned income. I suppose this could even be a 12 year old babysitting or lawn mowing, but the 12 year old would have to file a tax return (but they wouldn’t be charged any tax for their low income).
Nothing huge, but something that will get six decades of compound interest. Not only would that help all future generations to retire in an economically sustainable way, but it should also be a slow and steady boost to the economy.
Starting in 2024, you could rollover unused funds in 529 accounts (college savings accounts) into IRAs (retirement accounts) without any penalty. So I suppose this would check the box with what you’re asking for. Note: limit on this is up to $35k.
Unfortunately, that would be unlikely to happen in the best of times. The people who would benefit most won’t be voters for years, and won’t actually reap the benefits until the politicians passing the law are all long dead. Given the dystopian nightmare timeline we’re in now, I’d say the odds of a program like that being created are slightly lower than the odds of us trying to fund social security by invading Ireland to find their leprechaun gold.
Well beside the 529 rollover to IRA, there was a great problem called myRA which was a baby Roth IRA with no fees, no minimum deposit to open it, a guaranteed return (backed by the US Gov), and contributions could be as little as $5.
"The myRA was a “new type of saving bond that we can set up without legislation”[1] guaranteed to have a decent return, by holding an “add on” Treasury security in a Roth IRA, with contributions after taxes and lifetime growth to be tax free. The maximum annual contribution is $5,500, including any Roth and Traditional IRA contributions.[17] When a myRA account reaches either $15,000 in value or 30 years of age (whichever comes first), it will roll into a private-sector retirement account. The initial investment can be as low as $25, and one can make periodic investments for as little as $5 every time one gets paid.[18] "
The difference between my proposed policy and the ones you are discussing is that I would suggest that there should be some amount of funding for it coming from the government. I wouldn’t object to parents being able to invest some additional money into the account, but I don’t think it solves the problem if parents are the only ones contributing. Kids already put a strain on finances, and most people aren’t going to invest money they need today in an account that won’t be touched for more than half a century. Lower income families in particular would get the most benefit from such a program and would be the least likely to use it unless it was funded by the government.
I wouldn’t even want to make this an optional program, I’d say the account should be created automatically and parents can gain access in order add money of their own or possibly to adjust the investments among a defined set of options. When a kid comes of age they would be able to claim the account, and they should be able to contribute to it with a withholding from their paycheck.
Parents could do savings, but in the USA a “retirement account” is usally defined by an IRA or 401k. For an IRA, there’s actually no age restriction, but the person must have earned income. I suppose this could even be a 12 year old babysitting or lawn mowing, but the 12 year old would have to file a tax return (but they wouldn’t be charged any tax for their low income).
Starting in 2024, you could rollover unused funds in 529 accounts (college savings accounts) into IRAs (retirement accounts) without any penalty. So I suppose this would check the box with what you’re asking for. Note: limit on this is up to $35k.
Well beside the 529 rollover to IRA, there was a great problem called myRA which was a baby Roth IRA with no fees, no minimum deposit to open it, a guaranteed return (backed by the US Gov), and contributions could be as little as $5.
"The myRA was a “new type of saving bond that we can set up without legislation”[1] guaranteed to have a decent return, by holding an “add on” Treasury security in a Roth IRA, with contributions after taxes and lifetime growth to be tax free. The maximum annual contribution is $5,500, including any Roth and Traditional IRA contributions.[17] When a myRA account reaches either $15,000 in value or 30 years of age (whichever comes first), it will roll into a private-sector retirement account. The initial investment can be as low as $25, and one can make periodic investments for as little as $5 every time one gets paid.[18] "
source
It was closed down in 2018 because so few Americans used it. source
I was getting excited up until this point. It’s too late for my kids now but I wish we knew about this
Edit: oh, it was only there for a few years, and we were having a medical crisis at the time. We wouldn’t have been paying attention
The difference between my proposed policy and the ones you are discussing is that I would suggest that there should be some amount of funding for it coming from the government. I wouldn’t object to parents being able to invest some additional money into the account, but I don’t think it solves the problem if parents are the only ones contributing. Kids already put a strain on finances, and most people aren’t going to invest money they need today in an account that won’t be touched for more than half a century. Lower income families in particular would get the most benefit from such a program and would be the least likely to use it unless it was funded by the government.
I wouldn’t even want to make this an optional program, I’d say the account should be created automatically and parents can gain access in order add money of their own or possibly to adjust the investments among a defined set of options. When a kid comes of age they would be able to claim the account, and they should be able to contribute to it with a withholding from their paycheck.