The Trump admin is touting a new savings plan for American babies

This week, President Trump hosted a White House event to highlight a new investment plan that would give newborn US citizens $1,000 in a tax-deferred account that tracks the overall stock market.

• The proposed savings accounts—dubbed “Trump accounts”—are part of the massive Republican-backed tax and spending bill currently moving through Congress.

Million Thousand dollar baby

The plan would create index fund accounts with $1,000, funded by the government, for citizens born in the US between January 1, 2025, and December 31, 2028. To access these accounts—which would be administered by yet-to-be-determined financial institutions—at least one parent must provide a Social Security number with work authorizations.

• The child’s guardians or other private entities would be able to contribute up to $5,000/year—though there’s no cap on contributions from tax-exempt entities, such as private foundations.
• Account holders would reportedly be eligible to withdraw half of its cash value between their 18th and 25th birthdays, with tax penalties if the funds aren’t put towards education, a home down payment, or to start a small business.

But…Not everyone is convinced it’s a good idea. Some financial advisors say the “Trump accounts” are similar to existing tax-preferred savings opportunities, like 529 accounts, and actually offer worse investment incentives in many cases.

And while Americans would receive an extra $1,000, the arrangement appears to disproportionately benefit Wall Street via ongoing management fees, as well as wealthier Americans who maxed out the other opportunities and get another tax benefit, some critics argue.

The (potential) impact: The average $1,000 account would grow to ~$8,000 after 20 years, ~$69,000 after forty years, and ~$574,000 after sixty years if invested in a broad-based US equity index without any contributions or withdrawals, per a March analysis from the nonpartisan Milken Institute.

Looking ahead…The “Trump accounts,” along with the larger GOP-backed tax and spending bill, appear on track to receive congressional approval ahead of Trump’s desired July 4 deadline to sign them into law.

📊 Flash poll: In general, how do you feel about the White House and Congress’ plan to give newborn US citizens $1,000 in a tax-deferred index fund account?

• Support
• Oppose
• Unsure/other