Roth Accounts for Youth Savings Act (RAYS Act): H.R. 4129

As Co-Chairs of the Financial & Economic Literacy Caucus, we would like to draw your attention to an opinion piece published by Reuters discussing the RAYS Act, a bill we recently introduced.

The Roth Account for Youths Savings or RAYS Act (H.R. 4129) would make a modification to the earned income rules of existing Roth IRAs by allowing children, who generally lack earned income, to use their parents' earned income limits to make contributions to an account in the minors' name.

Currently, the only tax-preferred savings vehicles to save for non-working children are 529 College Savings Plans and Coverdell Education Savings Accounts. Only 3 percent of U.S. families own assets in either of these accounts, showing that current savings vehicles intended for children are failing to promote savings for the vast majority of Americans.  A robust research base shows that building savings in childhood is a key contributor to financial security and economic mobility over the life course.

The funds contributed into these accounts would be accessible throughout life to pay for the following: education, a down payment on a house, financial emergencies, and retirement.

 

 

Because they build on a familiar savings vehicle, the Roth IRA, RAYs would be available from existing financial service providers with whom families may already have relationships. As structured in the RAYS Act, these accounts would not create a new tax shelter or drain on the federal budget. RAYs would reduce the barriers to lifelong savings for low- and moderate-income families.

The importance of saving money for the future should be a lesson all Americans learn in childhood. The RAYS Act would allow families to instill the habit of saving for the long-term in America’s youngest citizens. We encourage our colleagues to cosponsor H.R. 4129.

 

Sincerely,

 

 

 

Rubén Hinojosa                                                                       Steve Stivers

Member of Congress                                                                Member of Congress

Co-Chair, Financial & Economic Literacy Caucus                     Co-Chair, Financial & Economic Literacy Caucus