What is the Invest America Act?

Peanut butter filled pretzels are the ideal snack. They are delicious; they are good for me; they are perfect any time of the day. If you think you have a better snack, you are wrong.

Ted Cruz recently introduced a radical proposal that could change the way America supports its future generations: the Invest America Act. Every person born in the United States to at least one U.S. citizen parent would receive a tax-deferred investment account seeded with $1,000.

Yes, this proposal echoes the Trump administration’s push to redefine birthright citizenship, but let’s set that part aside for a moment and focus on the money.

What is the Invest America Account?

Each eligible newborn would get $1,000 placed into a tax-deferred account invested in a mutual fund or ETF that tracks the S&P 500. (And yes, the bill refers to it as the “Standard and Poor’s 500,” like an angry mom using your full name.)

Once the child turns 18, they can begin withdrawing any gains, which would be taxed at the capital gains rate. Family members would also be allowed to contribute up to $5,000 per year, with annual increases for inflation.

So… How Much Could This Actually Grow?

Let’s do some (overly simplified) math. Since 1957, the S&P 500 has returned just over 10% on average. Let’s account for inflation (at least the Fed’s target) and call it an 8% average return. Here’s what that initial $1,000 turns into:

• After 18 years: $3,996 — Not bad, but also not hard for an 18-year-old to burn through in a weekend.

• After 65 years: $148,780 — Now we’re talking.

• After 85 years: $693,456 — That’ll pay for a pretty nice assisted living facility.

What If You Max Out Contributions?

Now, let’s assume a family contributes the max $5,000 per year from 0-18 and the account holder continues contributing $5,000 per year until withdrawing:

• At age 18: $191,247 — One semester at Georgetown.

• At age 65: $9.2 million — Avocado toast for breakfast, every day.

• At age 85: $43 million — Avocado toast AND Starbucks, every day. Bonkers money.

That’s the magic of compound interest. At an 8% return, your money doubles roughly every 9 years. So from age 65 to 85, it could double twice (plus a little extra), turning millions into tens of millions.

But Let’s Get Real

This is a best-case scenario. Markets don’t always deliver 8% returns, and not every 18-year-old will be wise with newfound wealth. Many will withdraw the funds early and spend them fast. For this program to be successful, it must be paired with strong financial literacy education starting in high school.

What Would This Cost?

There are about 3.6 million births in the U.S. each year. At $1,000 per baby, the annual cost would be $3.6 billion. That’s only 0.24% of the $1.5 trillion spent on Social Security in 2024. So relatively speaking, this is a low-cost investment in the nation’s future.

Can You Do This Without the Government?

Absolutely. The moment your child has a Social Security number, you can open a custodial brokerage account. Parents can gift up to $18,000 per year (per spouse) to a child without triggering gift taxes.

You can also consider other tax-advantaged accounts like:

• 529 Plans (for education)

• Custodial Roth IRAs (if your child has earned income)

It’s worth asking: If we already have accounts designed to build generational wealth, why doesn’t the government simply fund those? Maybe that’s a question for… DOGE? 

Bottom Line: Whether or not this bill becomes law, the lesson here is what we scream from the rooftops: start early, invest consistently, and let compounding do its thing.

Debrief on Deck

Next week, we will talk Costco. I recently became a member, and it is my favorite place. It’s just so efficient and, therefore, beautiful.

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on Instagram.

Until then, stay the course.

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