With Trump accounts, the new retirement bet starts at birth
More than 1.4 million American newborns are signed up to receive a $1,000 federally funded seed investment in their future when Trump accounts open for contributions on July 4. The investment accounts track the stock market performance of the 500 largest publicly traded companies in the U.S.
As Treasury Secretary Scott Bessent put it, the accounts will ensure “that every American baby, in short, is born a shareholder.”
That’s not entirely accurate, as newborns aren’t automatically enrolled. But the premise remains: Trump accounts reflect a growing mentality that, in a country where traditional pensions are disappearing and confidence in other guaranteed benefits is decreasing, wealth-building and retirement planning don’t begin with the first job but at birth.
A Treasury Department official told the New York Times the administration looked into auto-enrolling children, but privacy laws and administrative costs ultimately led them down an opt-in path.
How Trump accounts work
Parents or legal guardians need to sign up and file a form to benefit from the policy established in this year’s tax bill. And only those babies born between 2025 and 2028, essentially during President Donald Trump’s second term, qualify for the $1,000. The accounts themselves, however, are open to children under 18 and operate with the tax advantages of a traditional IRA. Families can contribute up to $5,000 a year.
Once the child turns 18, they can access the funds for qualifying expenses like buying a first home or paying for college, or allow the money to continue compounding in the market. Early withdrawals for nonqualified expenses before retirement will be taxed at an additional 10%.
Bessent reported that nearly 6 million accounts had been opened ahead of the July 4 contribution kickoff date, 1.4 million of which qualify for the $1,000.
In addition to government seed money, some philanthropists and companies are vowing to chip in. This week, chip maker Micron committed $250 million to the plan, vowing to deposit $250 in the accounts of up to a million children living in the seven states where Micron operates.
“This is the BIGGEST CORPORATE Investment of its kind, and will help jumpstart the American Dream for these fabulous children as we celebrate America’s 250th Anniversary!” Trump wrote on Truth Social.
And Michael and Susan Dell pledged $6.25 billion to the program. In that pledge, the first 25 million children to sign up for accounts under 10 years old living in zip codes with median incomes under $150,000 will get an additional $250 gift.
What does $1,000 turn into?
The Trump administration estimates that an initial $1,000 at birth will multiply to $6,000 by the time the child is 18. If left in the account with no other contributions, the trumpaccounts.gov website says that will grow to $243,000 by the time that person is 55 years old.
A separate Morningstar analysis conducted for CNBC paints a much more conservative picture. In it, they estimate that a single $1,000 deposit at birth would reach $3,324 by age 18 and $38,642 by age 55.
However, if families also contributed the maximum of $5,000 per year until the child was 18 and then left the account alone, Morningstar estimates it could grow to $5.5 million by the time the child turns 55.
Retirement options – and optimism – fade
Younger generations are increasingly skeptical the retirement vehicles available to their elders will be available or sufficient when it’s their time to stop working.
Only about one-third of surveyed Americans under age 30 believe Social Security will exist when they retire, according to the Cato Institute. The vast majority of Gen Z expect significant benefit cuts, at the very least.
A Straight Arrow report found that the nation’s youngest workers are increasingly relying on themselves, rather than the government, to fund their retirements.
They’re doing so by engaging in investment tools like the Roth IRA, which allows workers to set aside earnings that have already been taxed, only to withdraw that money tax-free at retirement age.
Republican Sen. Ted Cruz sees Trump accounts as the next vehicle, while Social Security is at risk of insolvency.
“Here’s the dirty little secret: Trump accounts are Social Security personal accounts,” he said at the Milken Institute’s global conference in May.
The idea of early investment is not new. Baby bonds were proposed as early as 2010, while hedge fund manager Bill Ackman built on the idea by proposing a nearly $7,000-per-baby, government-funded “birthright plan” that would grow to more than $1 million by retirement age.
Round out your reading
- America at 250: Straight Arrow’s week-long look at the pressures testing modern America.
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- Cluster of AI news sites suddenly goes dark after human reporter starts asking questions.
- A 79-year-old, obese, well-connected man gained exclusive access to a new weight loss drug. Is it Trump?
- Newsom pushes national wealth tax after opposing California billionaire tax.
Ella Rae Greene, Editor In Chief
