U.S. Launches $1,000 Retirement-Style Accounts for Newborns

The federal government has begun issuing $1,000 “Trump Accounts” to children born during President Donald Trump’s second term, with the money automatically placed in a State Street SPDR Portfolio fund that tracks the S&P 500 index. Parents or guardians must apply through the IRS to open an account, and the program is funded through September 2034, allowing up to six years after a child’s birth year to enroll.

The accounts function as traditional individual retirement accounts (IRAs) for minors, meaning contributions are not tax-deductible and withdrawals before age 18 are prohibited except for qualified education, home-purchase or disaster-relief expenses, after which ordinary income tax applies. Contributions from relatives, employers or charitable foundations are capped at $5,000 and $2,500 per year respectively, and some companies, such as Dell Technologies, have pledged supplemental funds for low-income families.

Projections on the program’s website suggest that the initial $1,000 could grow to about $6,000 by age 18, $15,000 by age 27 and $243,000 by age 55, assuming an average annual market return of more than 10%. Financial planners note that lower return assumptions would produce substantially smaller balances, and the government’s disclaimer warns that actual results may differ.

Because the only investment option currently available mirrors the S&P 500, roughly one-fifth of each account’s assets are allocated to the largest U.S. tech companies, including Nvidia, Apple, Microsoft and Amazon. The program is intended to increase long-term savings rates, which have fallen from over 13% of disposable income in the 1970s to under 4% in recent years.

Critics point to several limitations: the inability to access funds before age 18, the lack of tax-deduction benefits, the transfer of full control to the child at age 18, and the requirement for parents to initiate the account rather than it being automatically created.

The concept builds on earlier “Individual Development Account” pilots that provided early-life assets to low-income individuals and showed positive effects on home ownership and savings. The current naming of the accounts after a former president has generated mixed public reactions.