GOP Budget Bill Changes Name Of Proposed Children’s Savings Plan To ‘Trump Accounts’ From ‘MAGA Accounts’

The GOP megabudget bill proposes to create savings accounts for American babies born during President Donald Trump’s second term in office. 

The plan was initially called “MAGA Accounts” but was changed to “Trump Accounts” at the request of the White House.

The budget plan passed the Senate last week by one vote.

As part of Trump’s proposed domestic policy bill, the so-called “Trump accounts” would function like traditional investment accounts. Banks and investment firms would actively manage the accounts to build long-term wealth for American children.

Eligibility is predicated on the child being born between Jan. 1, 2025, and Jan. 1, 2029, with both the child and the parents having a Social Security number. If such requirements are met, the U.S. Treasury would automatically fund each account with an initial $1,000 to be invested in the stock market. Families and third parties could add up to $5,000 a year to the account.

Account holders can spend the money tax-free on specific costs approved by the government, such as educational expenses or starting a business. If funds are used for purposes not authorized by the government, the withdrawal amounts would be taxed as income. A 10% penalty could also apply for misusing the funds. 

Once the account holder turns 18, they can withdraw up to half of the funds for approved purposes. Between the ages of 25 and 30, account holders would have full access to their funds, provided the money is used for approved purposes. After turning 30, funds can be withdrawn completely and used for any purpose.

One of the primary intentions of “Trump accounts” is to substantially benefit lower-income families. Its automatic enrollment provides them access to a long-term investment program they might not otherwise be able to manage. However, lower-income families are also the most likely to need the funds for unauthorized uses, which could expose them to tax penalties under the program.

While the overall upside of the “Trump accounts” remains questioned by some politicians and policy analysts, there is hope that the accounts could provide a baseline level of future savings for American children.