A New Kind of Starter Account for the Next Generation

Starting in 2025, a new federal savings vehicle quietly appeared in the OBBA—one designed to give newborns a financial head start. Here's how it works:

• Every child born between 2025 and 2028 receives a $1,000 federal seed deposit into a designated account.

• Parents, grandparents, or other contributors can add up to $5,000 annually (after-tax) to the account.

• The account grows tax-free, and withdrawals are allowed for education, job training, or a first-time home purchase after age 18, or for any purpose after age 30.

In many ways, this new tool functions like a hybrid between a Roth IRA and a 529—but with more flexibility and fewer restrictions.

What Makes This Unique?

Unlike 529 plans, which are strictly for education expenses, these accounts offer:

• Longer growth runway with fewer penalties for flexible use

• Broader definition of qualified withdrawals, especially around housing and job training

• No requirement to tie funds to a specific school or institution

And with the $1,000 federal deposit kicking things off, families aren’t starting from scratch.

Who Should Consider This?

• New or expecting parents during the 2025–2028 window

• Grandparents looking to make meaningful, long-term gifts

• Families who want to balance flexibility and growth without being locked into education-only savings tools

This provision likely won’t replace a 529—but it could complement one beautifully. And for families unsure how their children will use future funds, this might be the more adaptable option.

Planning Tip:

You won’t find these accounts built into traditional financial planning tools (yet), but they offer a compelling opportunity for legacy-minded gifting, especially when coordinated with Roth contributions or custodial accounts.

👉 Curious how this fits into your family's planning strategy? Let’s build it into the big picture. Grab a spot on my calendar!

This article is for informational purposes only and not tax advice. Always consult your tax preparer for guidance specific to your situation.

LynnLeigh & Company - A Registered Investment Advisor This information is provided by LynnLeigh & Co. for general information and educational purposes based upon publicly available information from sources believed to be reliable – LynnLeigh & Co. advisors cannot assure the accuracy or completeness of these materials. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.   Past performance is not a guarantee of future returns.

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