The House Ways and Means Committee approved Republicans’ sweeping $4 trillion tax package today, after a marathon hearing, and included in President Trump’s “Big, Beautiful Bill” is a unique proposal to establish so-called “MAGA” savings accounts for children by giving newborns $1,000 from the federal government.
While retirement provisions were not included in the massive tax cut proposal released on Monday, it did include a provision to create what has been likened to a “401(k) for kids.”The pilot program — described as the “Money Account for Growth and Advancement” or “MAGA account” in a draft released by the House Committee on Monday — would give the parents of every baby with a Social Security number born between the beginning of 2025 and the end of 2028 a “one-time credit of $1,000.” That money will then accumulate interest and value through investments over time.
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Families and employees can contribute up to $5,000 per year, which would be adjusted for inflation, to the children’s accounts, and according to the House bill, the money will be “exempt from taxation.” The account investments can be placed in a broad, low-cost fund that tracks the S&P 500, growing tax-deferred until the individual reaches age 18. Distributions after age 18 would be taxed at the capital gains rate.
Senator Ted Cruz (R-TX) is behind the “MAGA Accounts” provision. He originally called it the "Invest America Act" when he introduced it on Monday, before it got rebranded as the MAGA accounts.
“The Invest America Act will trigger fundamental and transformative changes for the financial security and personal freedoms of American citizens for generations,” said Cruz. “Every child in America will have private investment accounts that will compound over their lives, enhancing the prosperity and economic participation of the vast majority of Americans.”
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“This is essentially a 401(k) for every newborn in America, and just like with 401ks, employers have seen it is a very attractive benefit for their employees to match or help seed those savings accounts,” Cruz said. “There are many Americans who don’t own stocks or bonds, are not invested in the market, and may not feel particularly invested in the American free enterprise system. This will give everyone a stake.”
Last year, Kevin Hassett, director of the White House National Economic Council, began promoting the idea of accounts seeded with $1,000 for newborns.
“MAGA accounts would empower American children to reap the American Dream with a strong financial foundation,” Trump spokesman Harrison Fields said in a statement. “This historic policy … reflects President Trump’s America First priorities.”
The MAGA accounts proposal still has to get through Congress, with Republicans holding razor-slim majorities in both the House and Senate, and the plan is likely to be revised if it remains in the bill at all.
The tax bill now heads to the House Budget Committee, which is tasked with combining all the portions of the Trump agenda bill into one package in advance of its consideration in the entire chamber.
House Speaker Mike Johnson has set a Memorial Day deadline to pass Trump's bill, with a Senate vote to follow.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
