President Trump has lauded the House-approved spending bill for the “pro-family initiative” tucked inside the legislation, which creates investment accounts for newborn babies.
"They’ll really be getting a big jump on life, especially if we get a little bit lucky with some of the numbers and the economy," Trump said at a Monday event at the White House that touted the accounts.
The "Big, Beautiful Bill" lays out rules for the Trump accounts. To qualify, a child must be a U.S. citizen, born within the next four years to at least one parent with a Social Security number. The money could be withdrawn starting at age 18.
Here’s what you need to know about the proposed federal program:
Account basics
Under the current bill text, the program would be available to families of all income levels, with babies born after Dec. 31, 2024, and before Jan. 1, 2029.
A one-time $1,000 contribution would be provided by the Treasury Department and deposited into a diversified U.S. stock index fund or its equivalent.
Families, guardians and private entities will be able to contribute no more than $5,000 per year to the account. An estimated 7 percent return on the $1,000 would compound to roughly $3,570 over 18 years, according to the Associated Press.
Nonprofits, companies can make contributions
The legislation does not provide a limit on the amount of money a nonprofit or company can donate to a child's investment account within the $5,000 annual contribution limit.
Several businesses, including Uber, Dell, Goldman Sachs and Altimeter have committed to setting aside billions to invest in the accounts of company employees who become new parents.
“It’s not just an account; it’s a launchpad. It puts the unstoppable engine of compounding to work for our kids, building a future for them from day one,” Uber CEO Dara Khosrowshahi said about the initiative during a White House roundtable.
Withdrawal rules
Children enrolled in the investment program are eligible to withdraw half of the cash value amount between their 18th and 25th birthdays, according to CNN.
Families and beneficiaries would pay a penalty for early withdrawal as there is no allowance for emergency use of the funds, the outlet reported.
Funds withdrawn for anything other than "qualified expenses," including paying for higher education, buying a residence or starting a business, will be taxed.
How it affects wealth gap
Researchers have said the investment accounts could widen America’s wealth gap.
“Under the current proposal, every child starts with the same amount, and families can contribute up to $5,000 annually,” the Urban Institute, a think-tank focused on social policy, wrote in a late May report.
“But relatively few households hold substantial liquid wealth in the United States, meaning higher-income households are far more likely than their lower-income counterparts to have the means to contribute additional funds,” it continued.
The study noted that Trump accounts are likely to only benefit those who have already maxed out existing tax-preferred savings opportunities, like 529 accounts. Instead, they suggested low income families with job insecurity are more likely to gravitate towards investing in traditional accounts that offer flexible guidelines.
Bill still needs Senate approval
Trump’s "One Big, Beautiful Bill" still needs approval from the upper chamber. Senators considering potential changes or cuts to the legislation, hoping to pass the bill before July 4.
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