‘Trump Accounts’ Will Provide $1000 For Newborns, Here’s the Details

Jingwei Zhao

Babies born from 2025 through 2028 are eligible for a new type of account that allows them receive $1000 from the government. The government created these new ‘Trump Accounts’ with the intent of helping families economically for their children.

According to financial experts, President Trump signed these accounts into law as part of the “One Big Beautiful Bill Act”, and they behave similarly to an individual retirement account. Annually, around 3.6 million babies are born in the U.S. With the federal government providing the funding for all the money, this new law may cost the government billions each year.

These accounts originally required that the funds be spent before the child reaches 30 years of age. However, many changes were made during Senate negotiations. Madeline Brown, a senior policy associate with the Urban Institute studying financial security, explained, “It [the accounts] has shifted more to a retirement product. It’s hard for me to tell what the goal of this program is.” Brown shares her confusion about the change, as many different types of retirement accounts already exist.

Despite some skepticism, the $1000 definitely has its benefits. Financial adviser Cheryl Costa said, “Who’s going to say no to $1,000?”

Policy/tax analysts have been questioning the Treasury Department about the details of the accounts, but the Treasury Department and the Internal Revenue Service have yet to respond. Tax Foundation senior policy analyst Alex Muresianu said, “My sense is there is still work to be done to get it up and running.”

Any U.S. citizens born from 2025 to 2028 are eligible. They have been assigned Social Security numbers, and there is no income criterion. Employers, family members, and parents can contribute up to $5,000 per year in additional funds made before the child turns 18 without any tax deductions. Ms. Brown points out that lower-income families are at a disadvantage in terms of the contributions they can make compared to wealthier families. She claims, “I don’t see a way that this reduces wealth disparities.”

The money in the accounts is restricted to only investments in stock mutual funds or exchange-traded funds tracking a U.S. stock index. The reason why other, less volatile holdings like cash or bonds are prohibited is unclear. As for why the new accounts can start investing so early, it is because the money will have more time to grow. In a news release, Senator Ted Cruz of Texas said they would “unleash the power of compound growth and create new generations of capitalists.”

The funds can only be withdrawn after the child reaches the age of 18. Once the child turns 18, the account will function as a traditional IRA, subject to standard requirements and rules. The I.R.S. is expected to provide additional information regarding this part of the account. According to Ms. Costa, the accounts should have multiple benefits for the children. Since the I.R.A. will start at such a young age for those eligible, she describes it as a “supercharged I.R.A.” The newborns with these ‘Trump Accounts’ will have an immense advantage compared to the many adults who only start saving for retirement around their early 30s through a traditional I.R.A. instead.

Normally, a Roth I.R.A. for a child’s retirement does not have tax deductions for contributions, but only allows tax-free withdrawals once the child has earned income. However, there is no income requirement for these new accounts. Parents can help them start saving for retirement far earlier. However, when it comes to saving for college, Ms. Costa said, “For college, I prefer the 529 account.” 529 accounts are sponsored by the state, and they offer more favorable tax treatment and higher contribution limits compared to the ‘Trump Accounts.’