Trump accounts for infants to reshape a generation

Signed into law by President Donald Trump as part of the One Big, Beautiful Bill, a new federal savings program could change how millions of American children prepare for major life expenses and retirement. The initiative, nicknamed “Trump accounts,” will provide $1,000 to every baby born in the U.S. between 2025 and 2028. Knewz.com has learned that the accounts are designed to grow over decades through additional contributions from families and employers, potentially turning modest starting amounts into significant sums through long-term investing.

How the ‘Trump accounts’ work

Every baby born in the qualifying years with a Social Security number will automatically receive the $1,000 deposit. Parents, relatives and employers can add up to $5,000 annually to the account. Employer contributions of up to $2,500 per year are excluded from taxable income, while family contributions before the child turns 18 will not be tax-deductible. According to reports, the funds must be invested in low-cost mutual funds or ETFs tracking a U.S. stock index such as the S&P 500. Safer options like bonds or cash are currently not permitted. While the projected numbers are substantial, the actual impact, according to experts, will depend on how much families contribute, whether employers participate and how beneficiaries choose to use the funds.

When can a beneficiary withdraw

Accounts will be available starting July 2026, with withdrawals restricted until the child turns 18. After that, the accounts operate like retirement savings plans, allowing penalty-free withdrawals after age 59-and-a-half, with exceptions for education, first-home purchases or starting a business. “Currently, the Trump account functions similarly to a traditional retirement account,” said Scott Hefty, senior wealth manager at Serae Wealth. “It offers tax-advantaged growth and penalty-free withdrawals after age 59 and a half. … This account reflects a broader shift in how Americans build wealth across generations.”

Potential impact on retirement

The long-term financial potential is significant, although under certain conditions. If maximum annual contributions of $5,000 are made from birth until age 65 and the account earns an average 7% annual return, the total before tax could reach about $6.95 million. However, this scenario requires families to sustain high contributions for decades, something many Americans may not manage. The Bureau of Economic Analysis reported that Americans saved just 4.5% of their disposable income in May 2025, underscoring the challenge. In a more achievable scenario, saving $1,000 per year, the account could grow to approximately $1.46 million by age 65. If only the initial $1,000 deposit is invested without further contributions, the balance could still reach around $93,380. The program’s restrictions, i.e., limiting investments to stock index funds and delaying withdrawals, are intended to promote disciplined, long-term saving. Hefty noted that the rules “are in place because the government is offering a benefit in exchange for encouraging certain outcomes.” However, there is also the fact that plenty of savers with Trump accounts are unlikely to keep the money there all the way through to retirement, with many potentially using the funds to pay for college expenses or to buy a home.

‘A tremendous gift for a child’

“That amount of money is a tremendous gift for a child. … Perhaps they can be more comfortable taking a job in an industry they enjoy, even if it is lower paying. Or it gives them the freedom to save for other non-retirement goals like a home down payment or college savings for their children,” said Matt Hylland, financial planner at Arnold and Mote Wealth Management. “If the seed contribution continues beyond 2028 … even a modest contribution, combined with the federal seed money, can be beneficial over time. I believe nearly every child who receives a Trump account will benefit in some way. The scale of that benefit will vary, but the baseline is an improvement compared to having no such account at all,” he added.

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