Trump's "One Big Beautiful Bill" launches new savings initiative, offering $1,000 at birth and long-term investment incentives

By lauraharris // 2025-07-21

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Under President Donald Trump's "One Big Beautiful Bill Act," every U.S. baby born between 2025 and 2028 will automatically receive $1,000 in a government-created investment account called a Trump Account.
Families can contribute up to $5,000 annually (after-tax), with employer contributions up to $2,500 also allowed. Funds must be invested in low-cost stock index funds and accounts grow tax-deferred.
Funds cannot be accessed until age 18. Between ages 18 to 25, up to 50 percent can be used for qualified expenses (e.g., education, first home, small business). Early or non-qualified withdrawals face taxes and penalties.
The program is praised for its automatic enrollment and universal access, but critics say it is regressive, benefiting wealthier families more since they can make larger additional contributions.
Experts warn the strict withdrawal rules and lack of hardship access may limit the program's effectiveness, especially for lower-income families facing financial emergencies.

A sweeping new savings initiative signed into law under President Donald Trump's "One Big Beautiful Bill Act" is set to give America's youngest citizens a financial head start, which may bring new complexities to family finances and tax planning. Every baby born in the U.S. between Jan. 1, 2025, and Dec. 31, 2028, will receive a $1,000 deposit into a newly created "Trump Account," an investment vehicle modeled loosely after individual retirement accounts (IRAs). Trump described the program as 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." (Related: House passes "Big Beautiful Bill" in narrow vote.) Each Trump Account, initially called the "Money Account for Growth and Advancement" (MAGA) accounts, will be automatically opened by the federal government and seeded with $1,000. From there, families can contribute up to $5,000 per year in after-tax dollars, a limit that will rise with inflation starting in 2027. Contributions can come from parents, grandparents or even family friends. Employers can also contribute up to $2,500 annually per child, with their payments counting as deductible business expenses and not as taxable income for the parent. Funds in Trump Accounts must be invested in low-cost mutual or exchange-traded funds (ETFs) that track broad U.S. stock indices, such as the S&P 500. The law caps fund expenses at 0.1 percent annually to ensure that more of the money goes toward long-term growth. Money inside the account grows tax-deferred, and unlike IRAs, Trump Accounts do not require the account holder to have earned income. However, withdrawals come with restrictions. Funds can't be accessed until the account holder turns 18. Between ages 18 and 25, withdrawals of up to 50 percent of the balance are permitted for qualified expenses. These include college tuition and fees, job training or certification programs, starting a small business and purchasing a first home. Qualified withdrawals are taxed at favorable long-term capital gains rates (15 percent to 20 percent), rather than as ordinary income. However, if money is withdrawn early or used for non-qualified purposes before age 30, it will be taxed as ordinary income and may face a 10 percent penalty. At age 31, any remaining balance is treated as a full distribution, taxed at ordinary income rates without penalty.

Trump accounts under "One Big Beautiful Bill Act" spark debate

The Trump Accounts drew both praise and criticism. For instance, Michelle Dallafior, senior vice president of tax and budget at First Focus for Children, said the program is regressive in its benefits. Every child receives the same $1,000 regardless of family income, but wealthier families are far more likely to add to the account over time, either through personal contributions or employer incentives. Indeed, estimates from the Milken Institute suggest that the initial $1,000, when invested in a broad equity index fund, could grow to about $8,300 over 20 years. But additional contributions, particularly by high-income families, could grow those balances significantly more. For lower-income families unable to contribute further, the final balance may still fall short of meaningful financial milestones, such as college tuition or a home down payment. Additionally, Madeline Brown, a senior policy associate at the Urban Institute, noted that the complexity of its withdrawal structure may undermine the effectiveness of the program. In other words, there will be no mechanism for hardship withdrawals. Families who fall on hard times may be penalized for using funds they desperately need. But Brown likes the program's automatic enrollment. She explained that making it this way rather than opt-in is key to ensuring broader participation. Research shows that opt-in programs tend to attract higher-income families more often, likely because they have greater awareness of such opportunities and more disposable income to contribute. By removing the need for families to take action to enroll, the program is designed to be more inclusive and accessible to all income levels. Moreover, the federal contribution begins at birth, drawing comparisons to so-called "baby bonds" – publicly funded trust accounts designed to narrow the wealth gap. Visit Trump.news for more stories like this. Watch this video on the White House's official statement about the passing of Trump's "Big Beautiful Bill."

This video is from Cynthia's Pursuit of Truth channel on Brighteon.com.

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Trump accounts under "One Big Beautiful Bill Act" spark debate

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