A House Bill Proposes a New Type of Savings Account

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House representatives have proposed legislation aimed at encouraging personal savings and financial security. The proposal includes a new tax-advantaged savings account called a Universal Savings Account, or USA. One of the key features is the removal of withdrawal requirements for specific applications—and the accounts would go further than Roth IRAs by permitting withdrawals before retirement.

The federal tax code already includes several savings accounts that allow tax-free distributions, but these are limited to specific purposes, such as retirement, medical care and college fund savings. USAs would remove the requirement to spend distributions on a single purpose. Payments into a USA would be from taxed income, but all withdrawals would be tax-free.

Who is impacted

The short answer is every taxpayer—potentially. Lawmakers and lobbyists advocating for USAs want a simpler savings vehicle that lets taxpayers create a flexible and tax-efficient fund for anything from preparing for an emergency to funding their lifestyles.

Is the USA another form of Roth IRA?

Some similarities exist between the two savings vehicles, but there are notable differences as well.

A Roth IRA requires income tax on contributions, but distributions are tax-free. Required minimum distributions, or RMDs, aren't required, but there are conditions attached. Distributions are only allowed after you separate from your employer, if you're at least 59 1/2 years old or disabled and the IRA has been open more than 5 years.

As with a Roth IRA, a USA would require income tax on contributions, distributions would be tax- and penalty-free, and RMDs wouldn't be required. The key difference is that USA holders could withdraw a distribution at any time they choose—and use the money for anything. For instance, they could withdraw distributions while still working and without age limit.

Will USAs happen?

USAs haven't been passed into law. The progression and specifics of the proposed bill—named HR 9010—depend on various factors, including legislative priorities, support from lawmakers and any amendments made during the legislative process.

How would USAs work in practice?

There are two main proposals, one from Project 2025 and the other from the Universal Savings Account Act of 2024. The proposals share basic concepts, with different rules around contribution amounts.

Project 2025

This proposal would allow a post-tax earnings contribution of $15,000 into USAs without restrictions on timing of withdrawals. All earnings and withdrawals from a USA would be tax-free. The $15,000 limit would likely be annual, rather than a lifetime cap.

The Universal Savings Account Act of 2024

This proposal would allow every US citizen and resident over the age of 18 to contribute a yearly maximum of $10,000 to a USA. Married couples filing a joint federal tax return would be limited to contributing $20,000. These maximum contributions would be index-linked to inflation annually. As with the Project 2025 proposal, any USA earnings would be tax-free, and withdrawals could be made at any time, for any purpose—without taxes or penalties.

An important point to note with this proposal is that higher income earners wouldn't have access to a USA. Individuals with a modified adjusted gross income, or MAGI, of $200,000 or more annually wouldn't be eligible. For married couples filing jointly, the limit would apply at $400,000. These limits would also be index-linked to inflation.