Trump Accounts for Newborns: Great Idea That Could Be Better

A smiling baby sits atop a pile of cash.

(Image credit: Getty Images)

The proposed “Trump Accounts” could mark a rare, game-changing shift in America’s retirement landscape.

With a $1,000 government-funded deposit at birth, eligible children would ultimately retire with more savings than roughly half of today's working adults.

But while the idea holds promise, it also exposes a deeper truth: America’s retirement system leaves too many people behind.

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This proposal isn’t just about newborns. It’s a test case for how early support can transform long-term outcomes. And it raises a critical question, namely, why isn’t the same support available to everyone else?

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

The political timeline problem

The House-approved Trump Accounts (formerly called MAGA Accounts) aim to give every child born during a second Trump term a financial head start. The benefit applies only to those born between January 1, 2025, and January 1, 2029 — an eligibility window tied to President Trump’s time in office.

The idea has sparked debate. Supporters say these accounts are as “beautiful” as the One, Big, Beautiful Bill that proposes them, echoing their potential for wealth-building at scale.

Objectors point to myriad problems — from limited tax benefits to complicated rules and issues with the broader legislative package. While the proposed Trump Accounts allow for tax-deferred growth and tax-favored withdrawals at the long-term capital gains tax rate, they differ from existing options like 529 plans and Roth IRAs, which offer tax-free withdrawals for qualified expenses such as education or retirement.

Still, there is rare consensus on one point: The U.S. needs stronger tools to help people build wealth, and retirement security is at the heart of that. Even a modest $1,000 deposit shows how powerful early investing can be when compounded over time.

The sobering math

If invested in a broad stock market index, the $1,000 government-funded deposit could grow to about $149,000 by retirement (assuming an 8% average annual return). Compare that to today’s reality: The median retirement savings across U.S. households is $87,000, and roughly half of all Americans report having no retirement savings at all.

Additionally, 1 in 4 savers has just one year or less of their current annual income set aside. For Gen X, now approaching retirement age, 54% believe they will not be financially prepared when retirement arrives. Half of all Americans fear outliving their savings.

That’s what makes the $1,000 proposal so striking. It’s not just a headline. It’s a salient reminder of how far even small, early interventions could go.

The bigger opportunity

Both Democrats and Republicans have floated versions of “baby bonds” as a way to close the wealth gap. Trump Accounts may be a starting point, but they’re far from a complete solution.

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If policymakers are serious about reform, these accounts could become part of a broader, more equitable system.

Real systemic reforms:

Expand eligibility beyond the political timeline and remove the arbitrary 2025-2029 birth window, making the program permanent for all future births.
Create catch-up accounts for Americans where we can offer similar seed funding for children already born, scaled by age to account for lost compound interest time.
Mandate universal workplace retirement access with automatic enrollment and escalation. Require all employers to offer a retirement plan or participate in a national system, with automatic employee enrollment and annual contribution increases.
Simplified account consolidation. Create a national system to automatically consolidate old 401(k)s when workers change jobs.
Secure Social Security. Without intervention, the combined Social Security trust funds are forecasted to be fully depleted by 2035, resulting in an across-the-board reduction to benefits.
Financial literacy mandate. Require retirement planning education in high schools and workplaces to address low levels of financial literacy and the corresponding impact on financial literacy.

Rather than viewing them as just another savings vehicle, policymakers should see the Trump Accounts as a catalyst for comprehensive retirement security reform. The power of compound interest is remarkable, but it requires two things most Americans lack: early action and consistent contributions.

By putting baby bonds back on the table, the current administration has a unique opportunity to guarantee security for millions of future retirees.

Retirement security shouldn’t hinge on the year you were born or the party in power. This proposal shows what’s possible. Now it’s time to make it permanent and make it fair.

The information provided in this article, including any projections for investment returns and future performance, is for informational and educational purposes only and should not be considered investment advice. Past performance is not indicative of future results. All investments carry risk, including the potential loss of principal. PensionBee is not liable for any losses or damages arising from the use of this information. Projections and forecasts are based on assumptions and current market conditions, which are subject to change.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Romi Savova is the founder and CEO of Pension Bee, a leading online retirement provider she launched in 2014 after experiencing firsthand the complexity of workplace retirement account transfers. Driven by her vision to simplify retirement saving for the mass market, Romi has transformed Pension Bee into a trusted brand with over $7 billion in assets under management and more than 260,000 customers.