Source: Cailianshe
Cailian Press, June 10 (Editor Ma Lan) US President Trump announced on Monday that a $1,000 "Trump Account" will be established for every child born in the United States between January 1, 2025 and January 1, 2029 and with a social security number.
Every eligible child will automatically join the program at birth. The money will be funded by the U.S. Treasury and is part of the Big and Beautiful Act currently under review in Congress. The funds may come from government cuts in other spending items and revenue from tariffs. Families and third parties can also inject up to $5,000 per child account each year.
Beneficiaries will be entitled to withdraw 50% of their account balance upon turning 18, the entire balance at age 25 for eligible purposes, including small business loans and higher education, and full control of the entire balance for any purpose at age 30.
This account is a tax-deferred account, mainly used to track the overall trend of the United States. It is understood that as long as the funds are used as required, the account income will be taxed at the long-term capital gains tax rate. If the funds are used for other purposes, the withdrawal portion will be taxed as income. Misuse of funds may also be subject to a 10% fine.
For reference, $1,000 invested in a fund tracking the S&P 500 on June 9, 2007, would have been worth about $5,590 including reinvested dividends, exactly 18 years as of Monday.
According to the latest data from the National Center for Health Statistics, based on the 3.6 million births in 2023, Trump's savings account currently has an initial balance of $1,000, which means the government will invest approximately $3.6 billion a year.
limitation
Some financial advisors said that the investment incentive mechanism of Trump's account may not be the best. Saving a fortune for American children is not Trump's first idea. There are similar plans in various states in the United States, such as the 529 college savings plan.
The 529 Plan refers to a higher education savings plan that the US government has been promoting since 1997 and that enjoys tax benefits. Before children go to college, future college tuition is deposited into the account in advance, and in the process of saving money into the 529 Plan, certain tax benefits can be enjoyed.
Ann Reilley, CEO of Alpha Financial Advisors, told the media that the Trump account may not be very attractive to parents or other custodians because the tax benefits of the Trump account are relatively limited compared to 529 plans and Roth individual retirement plans.
In addition, Sam Taube, an investment expert at personal finance website Nerdwallet, said that the amount of funding for Trump's account is not that generous. For example, Colorado will invest $100 in the 529 college savings of each newborn, and an additional $500 per year for the next five years, up to a total of $2,600.
Madeline Brown, senior policy associate at the Urban Institute, further pointed out that if the government only provides $1,000 at the beginning, it may be difficult to help children pay a down payment or continue higher education after 18 years. This means that the community and the government must provide additional funds.
On the other hand, Trump's account may also gain support from more American companies. Dell Technologies, which attended a meeting at the White House on Monday, promised on the spot to provide $1,000 in Trump's account funds for its employees' newborns, the same as the funds provided by the U.S. Treasury.
Uber and Goldman Sachs, which also attended the meeting, also expressed their support for Trump's savings plan, but did not provide further details.
