Trump Baby Accounts Could Create Generation of Millionaire Retirees

Newsweek

5 days ago

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A new federal savings initiative could dramatically reshape the financial future of millions of American children.
Signed into law by President Donald Trump as part of the One Big Beautiful Bill Act, "Trump accounts" promise to give babies born in the U.S. a $1,000 head start on building long-term wealth. With additional contributions from families and employers, and potentially decades of compounding investment growth, these accounts could have the potential to turn today's youngsters into retirement millionaires.
But while the headline numbers are eye-catching, the real impact may lie in how families choose to use the funds—for college, a first home, or retirement—and what kind of financial support system exists around them.
Here's how the program works, what it could grow into, and why some experts see it as the start of a generational wealth shift in America.
What Are Trump Accounts?
Each baby born in the U.S. between 2025 and 2028 who has a Social Security number will receive a one-time $1,000 deposit from the government into their Trump account. There are no income requirements to qualify.
Parents, relatives, and employers can contribute up to $5,000 annually to each account. While contributions made before a child turns 18 are not tax-deductible, employer contributions—up to $2,500 per year—are excluded from taxable income.
The saved money must be invested in low-cost mutual funds or ETFs that track a U.S. stock index, such as the S&P 500. For now, more stable investment options like bonds or cash are not on the table.
The accounts will become available in July 2026, and no money can be withdrawn until the child turns 18 years old.
"Currently, the Trump account functions similarly to a traditional retirement account," Scott Hefty, senior wealth manager and founding partner at Serae Wealth, told Newsweek.
"It offers tax-advantaged growth and penalty-free withdrawals after age 59 and a half. However, there are several exceptions that allow for earlier use. These exceptions include education expenses, buying a first home, or starting a business."
Hefty added that while some may prefer more flexibility, "the rules are in place because the government is offering a benefit in exchange for encouraging certain outcomes…This account reflects a broader shift in how Americans build wealth across generations. We are moving toward a model where families, employers, and the federal government each play a part."
The policy follows on from similar initiatives in the U.S. and abroad designed to bolster the lifetime savings of new generations. In Germany, new early-start pensions with a government contribution are being rolled out for kids. Here at home, Connecticut offers an initial government savings deposit of $3,200, albeit only for low-income children.
Composite image created by Newsweek of a retired couple, a stack of coins, a piggy bank and a baby.
Composite image created by Newsweek of a retired couple, a stack of coins, a piggy bank and a baby.
Photo-illustration by Newsweek/Getty
How Much Can Be Saved?
How much can be saved depends on whether contributions are made by the family of the child, and whether that child and/or their family/employers make contributions when they are an adult. The Internal Revenue Service is also expected to clarify tax rules around the savings before the accounts become available, which will impact overall savings.
Based on an average return rate of 7 percent annually and the maximum $5,000 being invested every year, by the time a child reaches 65 years old, they could bank approximately $6,950,000 before tax—plenty of money to see them through a long and comfortable retirement.
The simple fact of the matter is that to continue making the maximum $5,000 contributions every year means the parents of the child must be extremely financially secure, given that they may already be making contributions to their own savings funds, like 401(k)'s and general savings accounts. According to data from the Bureau of Economic Analysis, Americans saved only 4.5 percent of their disposable personal income in May 2025.
In a more realistic scenario, where the family and/or account beneficiary save a consistent $1,000 per year in the account and leave it untouched until 65, it would result in a saving of $1,464,800—still, nothing to be disappointed about.
If the $1,000 seeded from the government remains in the account with no contributions, by the time the account holder reaches 65, they will have around $93,380 to help them through later life.
"That amount of money is a tremendous gift for a child, and opens up a lot of extra doors," Matt Hylland, a financial planner at Arnold and Mote Wealth Management, told Newsweek. "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."
College and Home Buying
There's 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 being likely to use the funds to pay for college expenses or to buy a home.
As Hefty said, the account rules "reflect the overall goal of the program, which is to support long-term retirement preparedness." But he also acknowledged that the exceptions for earlier use—like education or first-home buying—align with key milestones in life.`
Based on the same 7-percent compounding rate and the maximum annual contribution of $5,000, the account would be worth $194,856 by the time the child turns 18. In a more realistic scenario, where the parent has put away $1,000 into the account per year, this would drop to $55,831—which is still no small amount to help toward expensive college bills.
The national average age to buy a home in the U.S. is now 38, according to a 2024 report by the National Association of Realtors. In this scenario, with a $1,000 seed and $1,000 contributions each year, there would be around $210,700—a hefty down payment, or in some cases, the total cost of a home in a more inexpensive area of the country.
"If the seed contribution continues beyond 2028," Hylland said, "the potential for long-term impact grows even further."
"Even a modest contribution, combined with the federal seed money, can be beneficial over time," he said. "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."