US President Donald Trump has unveiled a new proposal to create $1,000 investment accounts for children born in America between 2025 and 2028. The "Trump Accounts" or "MAGA Accounts", as they are called, aim to provide long-term financial support to future generations.
The program is a part of the "One Big Beautiful Bill," which also includes a broad tax-cut package and government spending. The bill has already passed the House of Representatives with the Trump Accounts provision included, but now faces resistance in the Senate.
What are Trump's accounts?
Every baby born in the US between January 1, 2025 and December 31, 2028, will be seeded with a one-time $1,000 contribution from the government into an investment account. Parents and families can also contribute up to $5,000 annually to each account.
Where will the funds go?
The funds will be invested in a US stock index and grow over time with the market. These funds can later be used by children for education, vocational studies or buying a home.
When can you withdraw the amount?
Account holders will be allowed to make partial withdrawals when they turn 18, access the full amount at age 25, but only for specific purposes, such as paying for higher education or taking a loan to start a small business and gain full access to the funds at age 30 to use it for any purpose.
Who controls the account until the child reaches 18?
Parents or the child's legal guardians manage the account until the child reaches 18 and becomes eligible to use the funds.
Who is eligible to open Trump's account?
To open an account, the child's guardian or parent must have a Social Security number and be authorised to work in the US.
Why do financial experts voice concerns over the new bill?
Unlike Section 529 of the Internal Revenue Code, a tax-advantaged savings plan, Trump Accounts offer no tax deductions for contributions, and earnings are taxed as ordinary income. Financial adviser Amy Spalding said she continues to recommend 529 plans to clients, citing their greater flexibility, broader investment choices, and superior tax advantages.
What would be the cost of the program?
Considering that about 3.6 million babies are born in the US every year and each will get $1,000 under the scheme, the cost of the program is expected to be around $3 billion per year, according to Time Magazine.
