Great gift by the Dell's. It is a decent program though I have some reservations. First, the government portion is given with borrowed money, except for the Dell's money. So more government debt but still a good program. The second reservation I have is whether it will be counted as assets by those applying for financial aid. If so, then the money plus any earnings could reduce future financial aid for those going to college. It is billed as a retirement account but says it can be used for college. Lastly, a quote from article:
"Private contributions will first be able to be made on July 4, 2026. The accounts will allow for private contributions of up to $5,000 a year. Employers can contribute up to $2,500 of that amount."
I edited this because it is in the Big Beautiful Bill and from what ai tells me there are no thresholds. So clearly the higher the income the great chance at maxing the savings.
If I were an employer I would offer to fund the 2.500 a year instead of giving raises for a year or two. That way I would not have to pay my portion of FICA taxes and it still could count as an expense, I would assume for the business.
An example from my brief study. I used an investment calculator.
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
First for the first 18 years, then that sum for an additional 40 years at a assumed interest rate of 7% which is very conservative.
A child of a family maxing the account, gets the 1000, but the family or employer can also provide up to 5000 a year to the account.
If you maxed it for 18 years. that is 91K plus the investment earnings. Assume 7% growth from inception, with payments of 400 a month for 18 years, and the child would have roughly 166k. At 9% they would have just over 200k.
Meanwhile a child whose folks or single parent is poor, would likely have little help except from the government so they fund the 1000 and at the end of 18 years they have 3,379 dollars.
Making the divergence even more pronounced, the fully funded account might go ahead and keep the account tax deferred. So lets assume they funded the account to the max for 18 years and had 166k, if you compound that for 40 years you would get 2.5 million. Here I assume that no more contributions are paid after the 18 years.
That is a great retirement for those who can max the account out. The poor would have 49K if they left their 3k plus in until they are 58.
The poor get a fair deal, it is better than nothing. Of course there are already tax deferred savings accounts for college. This however can be used for a home purchase or retirement.
I would conclude that this tax free account and baby bond money is tiled towards those that can afford to fund it.