Edward Markey

From the office of:

Edward Markey

From: The Honorable Ruben Hinojosa
Sent By:
Date: 10/30/2015

Help Our Children Start Saving Today for a Brighter Future Tomorrow

Co-sponsor a Bi-partisan, budget-neutral way to expand savings opportunities for our children


Dear Colleague:

As more Americans nearing retirement age face the prospect of deep financial insecurity in their later years, the need to begin saving early in life has become apparent.  At a time when nearly half of all working-age households own no retirement account assets,[1] and 30 percent of all households do not have a savings account,[2] removing barriers to saving and encouraging saving at a young age are crucial steps to increasing the financial security for future generations of Americans.

A robust research base shows that building savings in childhood leads to financial know-how and is a key contributor to financial security, education and economic mobility over the life course.[3]  Children from low-income families that save are more likely to be upwardly mobile than children from similar families that do not save.[4]  In addition, children that have a savings account are up to seven times more likely to attend college than similarly situated children.[5]

Unfortunately, the marketplace of savings products fails to provide parents with accessible, flexible options to save for their children and set them on a path to long-term success.  Currently, the only tax-preferred savings vehicles to save for non-working children are 529 College Savings Plans and Coverdell Education Savings Accounts.  While the education focused tax-preferred savings accounts are valuable tools, they are intended for the narrow purpose of higher-education and are designed to supplement, not supplant, other social-mobility and wealth-building vehicles like the Roth IRA.  Moreover, 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.[6]

To help fill this void, Roth Accounts for Youth Savings Act (RAYS Act) (HR 1377) would provide an accessible and flexible mechanism for promoting savings, financial literacy, economic mobility and increased college achievement beginning shortly after birth.  The funds contributed into these accounts would be accessible throughout life to pay for education, a down payment on a house, financial emergencies, and retirement.

The RAYS Act provides a necessary tweak to Roth IRA rules in order to allow parents to setup a Roth for their child as soon as the child is born.   Under current law, while a child of any age can technically make contributions into their own Roth IRA, such contributions can only come from taxable “compensation” income.   Consequently, as most children do not earn wages or salaries, the law effectively prevents children from receiving the long-term benefits of tax-advantaged savings until they enter the workforce later in life.

The RAYS Act could provide a significant boost to savings by lower-income Americans and could address a worrisome long-term trend: younger households’ deteriorating balance sheets.  Were it law today, up to $5,500 could be contributed this year from any source – parents, grandparents or family friends. Withdrawals would be subject to the regular IRA withdrawal restrictions – in other words, no penalty-free withdrawals before age 59 1/2, with the exception of education expenses or a home purchase.









Furthermore, as structured in the RAYS Act, these accounts would not create a new tax shelter, tax expenditure or drain on the federal budget. The contribution limit to a child’s RAYs is linked to the parent’s existing limit, allowing only as much in contributions to a RAY as the parent wishes to defer from his or her own IRA limit in a particular year.  In other words, the RAYS Act is budget-neutral!

The RAYS Act builds on the very familiar and already widespread Roth IRAs that are available from existing financial service providers with whom families may already have relationships. These accounts create an opportunity for families, communities, and other actors to invest in the well-being of kids by facilitating savings early in life.

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.

To co-sponsor this bill or request more information please email Roberto Haddad at ( or call at 202-226-8012 / Jessie Walls at ( or call at 202-225-2015.



Rubén Hinojosa                                 Steve Stivers

Member of Congress                         Member of Congress


[1] Rhee, Nari PhD, “The Retirement Savings Crisis: Is it Worse Than We Think?”, National Institute on Retirement Security, 2013.

[3] See Report prepared for The President’s Advisory Council on Financial Capability, summarizing robust set of research into benefits of early child savings:  Ted Beck & Ray Boshara, “The Roth at Birth – Building Financial Capability and Putting the Time Value of Money to Work for Young Americans, December 2011.

[4] Cramer, Reid, Rourke O’Brien, Daniel Cooper and Maria Luengo-Prado, A Penny Saved is Mobility Earned: Advancing Economic Mobility Through Savings”, Washington, D.C.: Economic Mobility Project, The Pew Charitable Trusts, 2009.

[5] Elliot, W. and Beverly, S. (2011). “The Role of Savings and Wealth in Reducing “Wilt” Between Expectations and College Attendance.” Journal of Children and Poverty, 17(2), 16-185.  The paper was first published as CSD Working Paper 10-01.  Center for Social Development, George Warran Brown School of Social Work, Washington University in St. Louis.