The Trump Accounts Have Landed

While July Fourth was all about letting freedom ring, returns on capital also had a moment, as the day marked the official launch of Trump Accounts, which are meant to help Americans start saving for retirement much earlier.

A vehicle designed for children

Any American with a Social Security number can have a Trump Account (also known as a 530A account) as long as they are enrolled by the year before they turn 18. The terms of participation may sound familiar:

• The child’s parents, the parents’ employers, family members, and charitable organizations can all make pre-tax contributions. Each account can receive up to $5,000 annually.
• The funds are automatically invested in a long-term index fund.
• The beneficiary takes control of the account at age 18. Standard rules for IRAs apply, and money gets taxed once it’s withdrawn.

It’s free to open an account. Some children will also get free contributions:

• Those born between 2025 and 2028 will receive $1,000 from the federal government.
• Children born between 2016 and 2024 could receive $250 if they live in a zip code with a median income under $150,000. Those funds are coming from Michael and Susan Dell’s pledge to the initiative.
• Some large employers offer grants to the children of US employees, including many big banks and tech companies.
• Private citizens are also taking part. An anonymous donor in San Francisco will contribute $500 to the accounts of every baby born there this year. Nicki Minaj pledged a total of up to $300,000 to fans’ accounts, but specifics haven’t been provided.

The response: Supporters say that giving families the opportunity to save for their children very early will level the playing field. Critics say the initiative won’t mitigate income inequality because parents who already have more will deposit more.

Zoom out: The website for Trump Accounts says that if an account receives an initial $1,000 and no further contributions this year, that could be worth $243,000 by age 55. But that depends on strong and consistent market returns between now and then.—HVL

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