Newborns to Get $1,000 ‘Trump Accounts’—Here’s How It Works

News Analysis

The Republican reconciliation law, better known as the One Big Beautiful Bill Act, introduced Trump Accounts for newborns, which were previously dubbed “MAGA accounts,” or “Money Account for Growth and Advancement.”

The accounts are new tax-advantaged investment vehicles comparable to individual retirement accounts, prefunded with $1,000 from the Treasury Department for every child born between Jan. 1, 2025, and Dec. 31, 2028. Children born before this year will also be eligible for the accounts, but not for the initial $1,000 seed money.

Parents will be able to contribute up to $5,000 annually, including up to $2,500 tax-free from a parent’s employer. The money must be invested in a broad stock market index, and earnings will grow tax-deferred until the account holder withdraws the funds.

As part of the new pilot program, parents must have Social Security numbers and be authorized to work in the United States. Families can choose to open a Trump Account at a financial institution, or the federal government will automatically enroll eligible children upon tax filing, with the option to opt out. There are no income requirements.

“It’s a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation, and they’ll really be getting a big jump on life,” President Donald Trump stated at a June 9 White House event. 

Economists say the children will likely profit from the U.S. stock market’s upward trajectory.

One paper by the Milken Institute estimates that the $1,000 accounts would balloon in value over time. After 20 years, they would increase to more than $8,000, according to researchers.

This is plausible. Over the past 20 years, for instance, the blue-chip Dow Jones Industrial Average has risen by more than 300 percent.

Once beneficiaries turn 18, they can withdraw half of the funds for “qualified purposes,” such as paying for tuition, training for a job, buying a first home, or starting a business. If the money is used for non-qualified expenditures, it will be taxed as ordinary income.

At age 25, they can access the full balance for specific reasons; a non-qualified expense will be taxed as ordinary income. After the account holder turns 31 years old, the account is terminated, and the full balance can be withdrawn for any purpose, at which point a long-term capital gains tax will apply.

What Experts Say

Experts say the program will encourage saving for a child’s future, promote financial literacy, and reduce wealth inequality.

“The program could also increase financial literacy of participants and their parents, which in turn would likely increase savings rates and wealth creation,” the Milken Institute paper stated. “Since all newborns would receive the grants, the program would reduce wealth inequality.”

However, the Institute for Family Studies said that Trump Accounts will do little to help families in the early years of parenthood, “when incomes are variable and expenses higher.”

“This is a policy that aims to boost the amount of savings held by teenagers, which may or may not be a laudable goal, but is far from a targeted pro-family approach,” the group stated in a report.

Economists say it will add yet another layer to an already complex landscape of savings account options.

“The tax code provides for at least 11 tax-advantaged savings vehicles, each with different rules, limitations, and regulations,” Tax Foundation economists said in a June 11 report.

For example, a popular savings instrument for families is the 529 college savings plan. This program is designed specifically to cover the costs of attending college or university, such as tuition, fees, books, and room and board. Additionally, 529s offer various other features, including no annual limit, tax-free growth, and no age cap.

Ultimately, a Trump Account will offer more flexibility for general wealth-building, while 529 plans are targeted for education savings.

“The addition of the Trump Accounts would further complicate savings for taxpayers who would have to keep track of yet another account,” the Tax Foundation economists said.

Instead, the government could offer universal tax-neutral savings accounts for taxpayers, they said.

Corporate America Pledges Support

Several companies have already pledged to participate in the savings account plan.

Michael Dell, CEO of Dell Technologies, said at a White House business roundtable event in June that his company will match the government’s contributions “dollar for dollar” for every child born to a Dell team member.

“This isn’t just a new investment,” Dell said in a statement. “This is an investment in our people, their families, our communities, and America’s future. And it embodies our core belief that opportunity should begin at birth.”

Goldman Sachs CEO David Solomon, Uber CEO Dara Khosrowshahi, and Altimeter Capital CEO Brad Gerstner also voiced support for the program.

“When everyone realizes they can be an owner, it unites our country around free-market principles and unleashes the next generation of American success,” Gerstner said.