Introduction
The One Big Beautiful Bill, signed into law on July 4, 2025, includes a groundbreaking initiative known as the Invest America Act, which establishes tax-advantaged investment accounts for children. This legislation is designed to provide every American child with a financial head start and encourage long-term saving and investing from an early age. It is a serious and optimistic step toward promoting economic opportunity and generational wealth.
The idea behind the Invest America Act was championed by investor and entrepreneur Brad Gerstner, founder and CEO of Altimeter Capital. As Gerstner put it, the initiative is designed to “pull every kid off the sidelines and put them squarely in the game” (Senate press materials, May 2025). His advocacy helped shape the bipartisan momentum that ultimately brought the program into law.
At Wealthspire, we work closely with clients who are focused on building and preserving family capital across generations. This new program offers a compelling tool to support that goal. We believe the opportunity is broadly relevant to anyone who cares about the financial future of our children and grandchildren.
What are these new investment accounts?
Beginning January 1, 2026, families will be able to open federally authorized tax-deferred investment accounts for any child under 18 years of age. These accounts function similarly to custodial retirement accounts and are intended to grow over time for the benefit of the child. Importantly, the accounts will be invested exclusively in diversified index funds that track the performance of the S&P 500 or comparable broad-based U.S. equity indices.
Eligibility & Government Contribution
As part of a pilot program, the federal government will make a $1,000 contribution to the account of every child born between January 1, 2025 and December 31, 2028. These funds will be automatically deposited once a qualifying account is opened with the child’s Social Security Number. If no account is established by the family, the Treasury is authorized to open an account on the child’s behalf. There are no income restrictions; every eligible newborn qualifies. The infrastructure for account opening and contribution processing will be in place beginning in 2026.
Even if a child was born before 2025 or does not qualify for the $1,000 seed contribution, families can still open an account for any U.S. citizen under the age of 18 beginning in 2026. Parents, guardians, grandparents, and others may contribute, subject to annual limits.
While the seed funding is limited to children born within the birth years of 2025-2028, the pilot program itself is funded through 2034. This extended funding allows the Treasury to continue administering the accounts, evaluating participation and outcomes, and potentially recommending ways to strengthen or expand the program. The ability to open and contribute to accounts does not sunset and is expected to remain available beyond the pilot period.
Contribution & Investment Rules, Tax Treatment, and Philanthropic Potential
- Annual contribution limit: Up to $5,000 per child per year from all sources, indexed for inflation after 2027
- Exclusions: The government’s $1,000 seed contribution and qualified nonprofit contributions do not count toward the $5,000 cap.
- Who can contribute: Anyone can contribute, including parents, relatives, friends, and even employers (up to $2,500 per child annually, not treated as income).
- Investment mandate: All funds in these accounts must be invested in a single, low-cost index fund or ETF tracking the S&P 500 or a comparable U.S. equity market index. This ensures diversification, low fees, and a shared growth experience tied to the American economy.
- Tax treatment: Contributions are made with after-tax dollars and grow tax deferred. Earnings are not taxed annually.
- Withdrawals: Funds may not be accessed until the child reaches age 18. Distributions follow IRA withdrawal rules. Withdrawn contributions are tax-free, but earnings are subject to ordinary income tax and a 10% early distribution penalty, unless an exception applies. Examples of exceptions include qualified higher education expenses, first-time home purchase, disability of the account holder, death of the account holder, qualified birth or adoption expenses; limits may apply.
This structure makes the accounts attractive for families seeking long-term growth, with the benefits of tax deferral. It also opens up opportunities for philanthropy. Families who are charitably inclined may choose to contribute to the accounts of children outside their immediate family such as nieces and nephews, godchildren, or children in their communities up to the annual contribution limit. For those who see wealth as a tool for empowerment, the Invest America Act provides a new and targeted means to give meaningfully to the next generation.
A Simple Illustration of Long-Term Growth
To understand the potential impact of early and consistent contributions, consider this example:
- A child receives the $1,000 government seed at birth.
- A family member contributes an additional $1,000 per year through age 17.
- The account is invested in a broad-based index fund earning an assumed 7% annual return.
Here is what that account could grow:
- At age 18: approximately $36,379
- At age 30: approximately $101,073
- At age 50: approximately $434,986
These numbers are illustrative, of course, but they underscore the long-term potential of steady contributions and disciplined investing.
Important Planning Considerations
An important financial aid consideration relates to how these accounts may be treated under the FAFSA (Free Application for Federal Student Aid). Since the Invest America Account is structured similarly to an IRA, it is likely that the account balance will not be reportable as an asset on the FAFSA. However, distributions made after the beneficiary turns 18, if included in the student’s taxable income, may reduce financial aid eligibility. Until formal guidance is issued by the Department of Education, families should consider this a potential factor in planning. For families seeking more control, this account can complement tools such as 529 plans or trusts. The spirit of this program is inclusive and forward-looking, as it allows every young person to begin adulthood with real financial footing.
Final Thoughts
The Invest America Act is a powerful new tool to help the next generation build wealth with discipline and optimism. For those committed to building financial security for our children and grandchildren, this is a unique opportunity. Michael Dell, CEO of Dell Technologies, during a White House roundtable event in June 2025, captured the spirit of this initiative when he said, “Imagine if every child in America had an investment account from birth. Imagine how that might change the conversation about opportunity, ownership and the future.” That vision is now becoming reality, an America in which every child holds a tangible stake in the nation’s economic growth and in their own financial future.
These accounts are expected to become available in 2026, but many details still need to be ironed out, so stay tuned. At Wealthspire, we are encouraged by this development and invite clients and families to consider how these accounts can complement their broader financial plans. Early investment and patient compounding remain the most consistent tools for building long-term wealth. Now, with public policy aligned in support, the case is even stronger for our children, and for the future they will shape. Contact us today to learn more about how The Invest America Act can support your family’s financial goals and provide a stable foundation for future generations.
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