A lesser-known component of the recently passed One Big Beautiful Bill is the introduction of the $1,000 Trump Accounts for newborns, a provision initially proposed by venture capitalist Brad Gerstner a year and a half ago.
According to Axios, this provision ushers in a new category of investment account within the tax code. "Every American born between 2025 and 2028 automatically receives an account with $1,000 from the U.S. Treasury, which will be invested in a low-cost index fund," the news outlet reported. The funds belong to the child and are held in a custodial trust until they reach 18, at which point the account transitions into a conventional retirement account.
Matt Lira, a Republican operative hired by Gerstner to lead the lobbying effort in Congress, expressed his vision for the accounts. "My dream scenario is people use a decent percentage of it to get a head start in life, and the remainder for long-term planning," Lira said.
As reported by Forbes, when the beneficiary turns 18, they can withdraw up to half of the account's value. At 25, they gain access to the full amount for "qualified purposes, including small business loans and higher education, before gaining full control of the entire balance at 30 for any use," Forbes detailed.
President Donald Trump elucidated the workings of these accounts during a White House meeting with business leaders in early June, prior to the passage of the Big Beautiful Bill. "For every U.S. Citizen born after December 31, 2024, before January 1, 2029, the federal government will make a one-time contribution of $1,000 into a tax-deferred account that will track the overall stock market," he explained.
The program is designed to run for four years for congressional budgeting reasons, but it could be extended by future legislation if the accounts gain popularity. Trump also highlighted that these accounts "will be open for additional private contributions each year from family, friends, parents, employers, churches, private foundations, and more."
Axios further reported that each child's account can accept up to $5,000 in additional contributions annually, including up to $2,500 on a tax-free basis from a parent's employer. Moreover, all Americans under 18 but born before 2025 can have an account established for their benefit, but they will not receive the initial $1,000 from the federal government.
Trump emphasized the potential benefits of these accounts, stating, "Extensive research shows that children with savings accounts are more likely to graduate high school and college, buy a home, start a business, and are less likely to be incarcerated." He also clarified that the funding for these accounts comes from the $1.7 trillion in mandatory savings in the Big Beautiful Bill related to Medicaid and other reforms.
The Washington Post projected that the cost of the Trump Accounts could exceed $3 billion annually, considering that approximately 3.6 million children are born in the U.S. each year. Meanwhile, the nonpartisan Milken Institute estimated in a March report that the initial $1,000 investment in a broad-based equity index fund, without any additional contributions, could grow to $8,000 after 20 years, $69,000 after 40 years, and $574,000 after 60 years.
Michael Dell, CEO of Dell Technologies, suggested that these accounts could usher in a new form of philanthropy in the U.S. He told Axios that he could envision wealthy individuals making significant gifts to entire ZIP codes or other regions through a mechanism that the Treasury Department is developing.
Dell announced during a June roundtable with Trump that his company would match the $1,000 federal contribution to the accounts for babies born to its employees. He and his wife, Susan Dell, through their foundation, also plan to make a "very significant gift" to benefit other children beyond those affiliated with Dell Technologies.
"The ability of families, friends, benefactors, and employers to match the governments generosity amplifies the life-changing potential of this initiative," Dell said.
The White House expressed optimism about the impact of the Trump Accounts, stating they "will afford a generation of children the chance to experience the miracle of compounded growth and set them on a course for prosperity from the very beginning."
Login