'Universal Savings Account' Proposed for All Americans: What to Know

Newsweek

12-05-2025

Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
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A new legislative proposal could soon give every American access to a flexible, tax-free way to build financial security.
The Universal Savings Account (USA) Act, introduced this month in both chambers of Congress, aims to create a new class of savings account that combines the tax advantages of a Roth individual retirement account (IRA) with the unrestricted access of a traditional savings account.
The bill, spearheaded by Texas Senator Ted Cruz and Representative Diana Harshbarger of Tennessee, both Republicans, would establish savings accounts that allow individuals to contribute up to $10,000 annually and withdraw their savings without taxation or penalties.
Why It Matters
The USA Act proposes a solution to what lawmakers say is an overly complex and punitive savings environment.
"A simple and accessible incentive savings plan will provide families with a way to establish financial security and prosperity," Cruz said.
Harshbarger called the bill a "commonsense" reform that "cuts through red tape and gives every American a flexible, tax-free way to save, invest, and spend—without government interference or penalties."
Stock image of U.S. dollars of varying value.
Stock image of U.S. dollars of varying value.
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What is a 'Universal Savings Account?'
According to the bill, a USA is a trust account where contributions are made in cash, and withdrawals can be made at any time for any purpose—with no age limits, penalties, or usage restrictions. Money held in the account is not subject to federal taxation when withdrawn.
According to the bill text, accounts could be opened with a maximum initial contribution of $10,000, which increases by $500 every year, before capping at $25,000. There would be no contribution limits based on income.
How Do USA Accounts Compare?
Like Roth IRAs, USAs feature post-tax contributions and tax-free growth. However, they offer a degree of more flexibility: Roth IRAs impose early withdrawal penalties and income eligibility caps, while USAs have none. Contribution limits also differ—$10,000 per year initially under the USA Act versus $7,000 for Roth IRAs in 2025.
Like a Roth, you can also choose to invest your savings with a USA account. You would not be able to invest it in life insurance contracts, according to the bill text, like with Roth accounts.
Compared to high-yield savings accounts, which offer taxed returns around 4–5 percent, a USA's untaxed growth offers a better net yield. For instance, a 4 percent return taxed at 22 percent yields just 3.12 percent, whereas the same return in a USA would remain at 4 percent.
What People Are Saying
Senator Ted Cruz said: "A simple and accessible incentive savings plan will provide families with a way to establish financial security and prosperity. This bill provides a straightforward solution to those challenges. I strongly urge my colleagues to pass this bill for the future generations of Americans."
Representative Diana Harshbarger: "The Universal Savings Account Act cuts through red tape and gives every American a flexible, tax-free way to save, invest, and spend—without government interference or penalties. Washington shouldn't be in the business of micromanaging how people use their own money. This bill is a win for working families, a win for personal freedom, and a win for financial independence."
The Tax Foundation said in a report: "Current tax-advantaged savings options are overly complex and restrictive." The new accounts "are tax-advantaged savings vehicles with unrestricted use of funds, allowing participants to save for any reason without penalty or excessive paperwork."
What Happens Next
The act has been introduced in both the House and the Senate and referred to the House and Ways Committee and the Finance Committee respectively.