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CNBC
08-07-2025
- Business
- CNBC
'Free money' from Trump accounts is a 'no-brainer,' says expert—but other options may be better
Some young American families will soon be getting a gift from Uncle Sam. The sweeping budget bill that President Donald Trump signed into law on Friday included a provision for the creation of investment accounts that parents can open on behalf of children under 18. And for U.S. citizens born from 2025 through 2028, the government will seed the accounts with an initial contribution of $1,000. Republican lawmakers have nicknamed these vehicles "Trump accounts," but the idea of creating so-called baby bonds has been around for a while. Hillary Clinton brought up the idea during her 2007 campaign, for example, and Democratic Senator Corey Booker proposed legislation offering up to $50,000 for newborns in 2021. Depending on your goals, these new accounts don't offer some of the tax advantages available through existing accounts, such as 529 accounts for college savers or Roth IRAs for retirement investors. But there's no reason a Trump account shouldn't be part of your portfolio if your child qualifies, says Jaime Eckels, a partner at Plante Moran Financial Advisors. "Someone is giving me $1,000 for my kid? That's a no-brainer. Who turns away free money?" she says. "From there you'll have to decide what additional savings you'll have for your child." Here's what she and other financial pros say you should know about Trump Accounts. Once the government seeds the account, parents can contribute up to $5,000 per year, post-tax, to a portfolio that must be invested in a diversified fund that tracks a U.S. stock index. Employers can contribute to employees' children's accounts as well — up to $2,500 a year, an amount that won't count as income to the worker. Account holders can't touch the money until they turn 18, after which the accounts are treated much like a traditional IRA. While the money grows tax-deferred, withdrawals are taxed as regular income, plus a 10% penalty if you take the money out before age 59½, with some exceptions. Money can be taken out penalty-free for higher education expenses, or for those that come as a result of disability, domestic abuse or a natural disaster. There's a $10,000 exception for new home purchases, and $5,000 can go toward a baby of their own. The accounts' selling point for investors, advocates say, is the opportunity to begin investing early. That was the same message people like Brad Gerstner, founder and CEO of private investing firm Altimeter Capital, promoted while working with lawmakers in recent years on a project called Invest America. Gerstner, who spoke alongside other CEOS at a White House roundtable in June, basically got what he asked for — a long-term account seeded with $1,000 from the government plus incentives for corporations to contribute more. "Think of 401(k)s from birth, where corporations like Uber or United will then match those grants to those kids at birth, where parents now who were afraid [or] didn't know how to open up an account can now save 50 bucks a week or 100 bucks every couple of weeks," Gerstner said at the CNBC Delivering Alpha Summit that year. After three decades, "a 30-year-old today would have over $270,000 in their Invest America account." His example isn't unfeasible. An account with a $1,000 initial deposit and $200 monthly contributions growing at a 7% annual rate over 30 years would yield a balance of about $254,000, according to Make It's compounding interest calculator. Increase the rate of return to 8%, and the balance jumps to about $311,000. "There's a forced saving component when you put $1,000 into an account. It's not going to make or break most people, but sometimes it gets people interested in saving and investing," says Eckels. "Those things are great." If you're already in the habit of saving and investing money, however, existing accounts may offer more attractive tax benefits, depending on your goals, experts say. If you're hoping to set aside cash for your child's education, for instance, a 529 plan is likely the stronger option. Like Trump accounts, these vehicles are funded with after-tax dollars, but withdrawals are exempt from federal taxes (many states offer an income tax break on 529s as well) as long as the money is put toward a qualified education expense. These include not only college tuition but also trade school and apprenticeship expenses, and up to $10,000 for K-12 tuition and student loan payments. These accounts are designed to save for education, but you're not totally pigeonholed if you invest in one and your kid's education costs less than you thought. For 529 accounts that have been open at least 15 years, you can roll over up to $35,000 in unused funds to a Roth IRA. You can also change the beneficiary of the account from one child to another. If you want to use the Trump account to invest for long-term goals, such as retirement, brokerage accounts and Roth IRAs may come with more favorable tax treatment or flexibility. A so-called custodial brokerage account, which you can open on a child's behalf, allows you to manage the portfolio until they come of age to take it over themselves. These are regular, taxable accounts, so gains on any investment held for more than a year are taxed at the capital gains rate — generally lower than the income rate you'll owe on Trump account withdrawals. Plus, these accounts allow you to hold virtually any investment, including stocks, bonds and cryptocurrency, as opposed to the U.S. stock index fund you must hold in a Trump account. Parents of children who have earned income could also consider opening a Roth IRA on the child's behalf. Roths are funded with after-tax dollars as well, but investments held in these accounts grow tax-free. And provided that your child is 59½ when they begin withdrawing from the accounts, they won't owe a dime in tax to the U.S. government on the money. You can always withdraw up to what you've contributed to a Roth tax- and penalty-free. You can even withdraw earnings, too, without owing anything, for qualified purchases, including up to $10,000 for buying your first home. Contribution limits may play into your calculus around which accounts to fund as well. Roth IRAs clock in slightly above Trump accounts, with a $7,000 annual maximum for those under age 50. Single filers can contribute up to $19,000 per beneficiary per year to a 529 account without incurring gift tax, while married couples filing jointly can put in $38,000. There's no limit on taxable brokerage accounts. Still, if you're in the position to take advantage of free money and compounding growth, you have very little to lose, and plenty to gain, with a Trump account, says Eckels. While other accounts may be more appealing for your particular goals, "Trump accounts can be a great complement," she says.
Yahoo
27-06-2025
- Business
- Yahoo
Consumers Shrug Off Geopolitical Conflict to Send Sentiment Higher
The Michigan Consumer Sentiment Index improved to 60.7 in June, ticking higher than its preliminary reading. Consumers reported improved sentiment for the first time in six months. Consumer expectations improved by more than 20% amid higher optimism over personal finances and business conditions, while inflation expectations also improved. The reading is still lower than the post-election bump in December as worries over the impacts of tariffs economic effects of the conflict in the Middle East didn't weigh on consumers' minds in June as sentiment continued to inch higher and inflation concerns faded. The Michigan Consumer Sentiment Index improved in June to 60.7, a tick higher than its preliminary reading and 8.5 points higher than the prior month. It was the first improvement of the closely followed survey results in six months. The reading comes after a similar survey ticked lower this month. Consumers were still worried about tariffs but were more optimistic about personal finances and business conditions. The survey that ended on Monday also showed that the U.S. airstrikes on Iran didn't impact consumers' feelings about the economy. 'It's not that consumers don't recognize the risks that are present; they do. Instead, they appear to be adapting to the new reality of geopolitical instability and fluid policy, and the sense that developments can change the narrative—and the resulting outlook—meaningfully and with little warning,' wrote Jim Baird, chief investment officer with Plante Moran Financial Advisors. Sentiment is still about 18% lower than the December 2024 post-election surge. Pessimism about the labor market and worries that tariffs will raise prices have faded but still persist. Inflation expectations improved, as consumers predicted prices would increase by 5% over the next year, lower than May's expectation of 6.6%. 'Consumers feel they have some breathing room given that the historically high tariffs announced earlier this year have not been sustained, and the worst-case scenarios for the economy have not come to fruition,' said Survey Director Joanne Hsu. Read the original article on Investopedia
Qatar Tribune
08-06-2025
- Business
- Qatar Tribune
US stocks edge toward records with inflation data in focus
Agencies New York The US stock rebound has driven key indexes to the cusp of record levels, with fresh economic data and trade and fiscal policy developments set to test whether equities will get an extra push higher in thenear term. A monthly US inflation report headlines the events for markets in the coming week. Equities have bounced back from a steep fall in April, sparked by concerns about the economic fallout from President Donald Trump's tariff plans. Stocks ended the week on a high note, with the S&P 500 closing on Friday above 6,000 for the first time since late February, buoyed by a monthly US jobs report that calmed worries about theeconomy. The benchmark S&P 500 ended on Friday 2.3 percent off its record closing high from February. 'I'd still say it's a cautious tone' in the market, said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Despite a 'recovery off the lows, I still think it's a market that is looking for greater clarity.' Some uncertainty stems from how the US economy is weathering the shifting trade backdrop. Trump has eased back on some of the harshest tariffs since his April 2 'Liberation Day' announcement sent stocks tumbling, but investors are waiting to see how other levies may be rippling through the economy. The consumer price index report for May, due on Wednesday, could give insight into the tariff impact at a time investors are wary of any flare-ups in inflation. 'Consumers are feeling the impact of higher prices and if there are indications that near-term inflation could re-accelerate, that is going to put further pressure on discretionary spending and ultimately could lead to a more pronounced slowdown in growth,'Baird said. The CPI report will be one of the last key pieces of data before the Federal Reserve's June 17-18 meeting. The US central bank is widely expected to hold interest rates steady at that meeting, but traders are pricing in nearly two 25-basis point cuts by the end of the year. 'If we see inflationary data that defies what people are concerned about based on this tariff talk and it comes in cooler, then that could also be a catalyst to at least test those old highs,' said Jay Woods, chief global strategist at Freedom Capital Markets. US stocks closed higher on Friday, with the Dow and S&P 500 gaining 1 percent and the Nasdaq climbing 1.2 percent. For the year, the S&P 500 is up 2 percent. But the index has stormed back over 20 percent since April 8, at the depth of the stock market's plunge on concerns over the tariff fallout. Investors also are grappling with uncertainty over a sweeping tax-cut and spending bill under review in the US Senate. Wall Street is monitoring how much the legislation could stimulate economic growth, but also inflate the country's debt burden as widening fiscal deficits have become a central concern for markets in recent weeks. 'As debt increases, it has a greater negative impact on growth,' said Kristina Hooper, chief market strategist at Man Group. The legislation also appeared to be the source of a severe rift between Trump and Tesla chief Elon Musk, which weighed on stock indexes. Former Trump ally Musk called the bill at the heart of Trump's agenda a 'disgusting abomination,' while Trump said he was 'disappointed' by the billionaire's public opposition. Trade talks also remain at the forefront of markets, with a 90-day pause on a wide array of Trump's tariffs set to end on July 8. Trump said on Friday three of his cabinet officials will meet with representatives of China in London on Monday to discuss a trade deal. 'When it comes to policy from Washington, there are still big question marks,' said Bob Doll, chief investment office at Crossmark Global Investments.
Time of India
07-06-2025
- Business
- Time of India
Wall Street Week Ahead: US stocks edge toward records with inflation data, policy progress in focus
The U.S. stock rebound has driven key indexes to the cusp of record levels, with fresh economic data and trade and fiscal policy developments set to test whether equities will get an extra push higher in the near term. A monthly U.S. inflation report headlines the events for markets in the coming week. Equities have bounced back from a steep fall in April, sparked by concerns about the economic fallout from President Donald Trump's tariff plans. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Accounting Automation Software Might Help You To Earn More Accounting Automation Software | Search ads Undo Stocks hit a speed bump on Thursday as a public rift between Trump and Tesla chief Elon Musk sent shares of the electric vehicle maker down 14%. The benchmark S&P 500 ended on Thursday just over 3% off its record closing high from February. It closed down 0.5% on the day as Tesla's tumble offset news of progress in tariff talks between Trump and Chinese President Xi Jinping. "I'd still say it's a cautious tone" in the market, said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Despite a "recovery off the lows, I still think it's a market that is looking for greater clarity." Some uncertainty stems from how the U.S. economy is weathering the shifting trade backdrop. Trump has eased back on some of the harshest tariffs since his April 2 "Liberation Day" announcement sent stocks tumbling, but investors are waiting to see how other levies may be rippling through the economy. Live Events The consumer price index report for May, due on Wednesday, could give insight into the tariff impact at a time investors are wary of any flare-ups in inflation. "Consumers are feeling the impact of higher prices and if there are indications that near-term inflation could re-accelerate, that is going to put further pressure on discretionary spending and ultimately could lead to a more pronounced slowdown in growth," Baird said. The CPI report will be one of the last key pieces of data before the Federal Reserve 's June 17-18 meeting. The U.S. central bank is widely expected to hold interest rates steady at that meeting, but traders are pricing in about two 25-basis point cuts by the end of the year. "If we see inflationary data that defies what people are concerned about based on this tariff talk and it comes in cooler, then that could also be a catalyst to at least test those old highs," said Jay Woods, chief global strategist at Freedom Capital Markets. For the year, the S&P 500 is up about 1%. But the index has stormed back over 19% since April 8, at the depth of the stock market's plunge on concerns over the tariff fallout. Investors also are grappling with uncertainty over a sweeping tax-cut and spending bill under review in the U.S. Senate. Wall Street is monitoring how much the legislation could stimulate economic growth , but also inflate the country's debt burden as widening fiscal deficits have become a central concern for markets in recent weeks. "As debt increases, it has a greater negative impact on growth," said Kristina Hooper, chief market strategist at Man Group. The legislation also appeared to be the source of a severe rift between Trump and Musk, who had been his strong ally. Musk called the bill at the heart of Trump's agenda a "disgusting abomination," while Trump said he was "disappointed" by the billionaire's public opposition. Trade talks also remain at the forefront of markets, with a 90-day pause on a wide array of Trump's tariffs set to end on July 8. "When it comes to policy from Washington, D.C., there are still big question marks," said Bob Doll, chief investment office at Crossmark Global Investments.
Economic Times
07-06-2025
- Business
- Economic Times
Wall Street Week Ahead: US stocks edge toward records with inflation data, policy progress in focus
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel The U.S. stock rebound has driven key indexes to the cusp of record levels, with fresh economic data and trade and fiscal policy developments set to test whether equities will get an extra push higher in the near term.A monthly U.S. inflation report headlines the events for markets in the coming week. Equities have bounced back from a steep fall in April, sparked by concerns about the economic fallout from President Donald Trump's tariff hit a speed bump on Thursday as a public rift between Trump and Tesla chief Elon Musk sent shares of the electric vehicle maker down 14%.The benchmark S&P 500 ended on Thursday just over 3% off its record closing high from February. It closed down 0.5% on the day as Tesla's tumble offset news of progress in tariff talks between Trump and Chinese President Xi Jinping. "I'd still say it's a cautious tone" in the market, said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Despite a "recovery off the lows, I still think it's a market that is looking for greater clarity."Some uncertainty stems from how the U.S. economy is weathering the shifting trade backdrop. Trump has eased back on some of the harshest tariffs since his April 2 "Liberation Day" announcement sent stocks tumbling, but investors are waiting to see how other levies may be rippling through the consumer price index report for May, due on Wednesday, could give insight into the tariff impact at a time investors are wary of any flare-ups in inflation."Consumers are feeling the impact of higher prices and if there are indications that near-term inflation could re-accelerate, that is going to put further pressure on discretionary spending and ultimately could lead to a more pronounced slowdown in growth," Baird said. The CPI report will be one of the last key pieces of data before the Federal Reserve 's June 17-18 U.S. central bank is widely expected to hold interest rates steady at that meeting, but traders are pricing in about two 25-basis point cuts by the end of the year."If we see inflationary data that defies what people are concerned about based on this tariff talk and it comes in cooler, then that could also be a catalyst to at least test those old highs," said Jay Woods, chief global strategist at Freedom Capital Markets. For the year, the S&P 500 is up about 1%. But the index has stormed back over 19% since April 8, at the depth of the stock market's plunge on concerns over the tariff also are grappling with uncertainty over a sweeping tax-cut and spending bill under review in the U.S. Senate. Wall Street is monitoring how much the legislation could stimulate economic growth , but also inflate the country's debt burden as widening fiscal deficits have become a central concern for markets in recent weeks."As debt increases, it has a greater negative impact on growth," said Kristina Hooper, chief market strategist at Man Group. The legislation also appeared to be the source of a severe rift between Trump and Musk, who had been his strong ally. Musk called the bill at the heart of Trump's agenda a "disgusting abomination," while Trump said he was "disappointed" by the billionaire's public talks also remain at the forefront of markets, with a 90-day pause on a wide array of Trump's tariffs set to end on July 8. "When it comes to policy from Washington, D.C., there are still big question marks," said Bob Doll, chief investment office at Crossmark Global Investments.
