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Over the long 4th of July holiday weekend, President Donald Trump signed into law the One Big Beautiful Bill, which includes the $1,000 “Trump accounts” for every American newborn.
Originally called a MAGA account when it was introduced by Senator Ted Cruz in May, the saving initiative is now been rebranded as a "Trump account," which “will trigger fundamental and transformative changes for the financial security and personal freedoms of American citizens for generations,” said Sen. 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.”
The program itself has also undergone changes in the days leading up to final passage on July 4. The provision now creates a pilot program for newborns born between Jan. 1, 2025 and Dec. 31, 2028, which allows the federal government to contribute a one-time deposit of $1,000 per child into every eligible account. This account is available to all children who are U.S. citizens.
Trump Accounts provide a more limited and restricted tax benefit than existing saving incentives, such as 529 accounts. Parents would then be able to contribute up to $5,000 a year and the balance will be invested in a diversified fund that tracks a U.S. stock index. Employers could also contribute up to $2,500 to an employee’s account and it wouldn’t be counted as income to the recipient.
Dell Technologies announced it will match the government contribution dollar-for-dollar for every child born to a Dell team member.
“Early childhood investments have far-reaching benefits,” said Goldman Sachs CEO David Solomon, who attended an “Invest in America” Roundtable at the White House in June, along with Dell Technologies CEO Michael Dell and Goldman Sachs CEO David Solomon. “Our economy’s future vitality is dependent on young people understanding the power of investing for the long term.”
In general, the Trump accounts, which originally described as a “401(k) for a newborn baby," said White House Press Secretary Karoline Leavitt, will now be structured as individual retirement accounts. No distributions are permitted from the Trump account before the calendar year in which the beneficiary attains age 18. Thereafter, beneficiaries can access the account with some constraints and the account is treated and taxed the same way as a traditional IRA.
Starting in 2026, children under the age of 18 qualify to have a Trump account are eligible to receive contributions from parents, relatives, and other taxable entities as well as non-profit and government entities.
Contributions to the Trump accounts cannot exceed $5,000 annually. Employers also could contribute up to $2,500 if certain program design requirements are met, and such contributions will be subject to the annual limit. Contributions provided to Trump accounts from tax exempt entities, such as private foundations, are not subject to the $5,000 annual limit. In addition, contributions are not permitted after the calendar year in which the beneficiary attains age 17.
Related: $1,000 401(k) ‘Trump accounts’ for babies in just-passed House tax bill
In addition, one of the most influential CEOs, BlackRock's Larry Fink, said in June that he supports the proposal to create investment accounts for children at birth.
The Trump Accounts will “be a game-changer for new parents even before their newborn baby can walk or talk,” said House Ways & Means Committee Chair Jason Smith. “Their child will have money saved to one day learn a trade, start a business, or to buy a home. Every child born under this policy will have a better shot at a future. It does not matter if they live on a city block or on a county road — this will make a significant difference to their lives.”
While Republican lawmakers have said Trump accounts will introduce more Americans to wealth-building opportunities, some experts say a 529 college savings plan, which allow anyone to set aside money in an investment account for education expenses, may be a better alternative because of the higher contribution limits.
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