New Grandparents Opportunity

Beginning July 4, 2026, the federal government will open a new tax-deferred investment account for kids born between 1/1/2025 and 12/31/2028 and fund it with a one-time contribution of $1,000. 

Up to $5,000 can be contributed to the account each year by parents, grandparents and others. 

The contributions are not tax-deductible. 

As of now, the funds will be invested in a low-cost S&P 500 index fund.

The funds are locked up until age 18. 

Withdrawals after age 18 will be allowed for qualified uses like education, first time home purchase (up to $10,000) or first child expenses (up to $5,000).

Otherwise, withdrawals pre-59 ½, will be taxed as ordinary income plus a 10% early withdrawal penalty. 

There is no 10% penalty for withdrawals taken after 59 ½.