The House has approved government-funded investment accounts for newborns as part of President Donald Trump’s massive tax bill, but financial experts warn families already have access to superior savings options and question whether the new accounts serve more as political bait than genuine financial benefit.
The so-called “Trump savings accounts” — renamed from “MAGA Accounts” in an eleventh-hour amendment — would provide $1,000 government deposits for children born between 2025 and 2029. The Congressional Joint Committee on Taxation estimates the four-year pilot program will cost taxpayers $17 billion over a decade, representing about 1.2% of the overall package.
But is it worth it?
The purpose of these Trump accounts could be to make an increasingly unpopular “One Big Beautiful Bill” more palatable to voters. Realistically, families seeking to save for children’s futures are better off using existing tax-advantaged accounts that offer greater flexibility and better terms.
The proposed Trump accounts limit investments to one stock market index fund with no international diversification or bond options. Even custodial brokerage accounts (UTMA/UGMA) offer more investment flexibility. Contributions are also capped at $5,000 annually, with the funds locked until age 25 for full access. There are, of course, penalties for non-qualified withdrawals.
529 college savings plans allow unlimited contributions, offer state tax deductions in many states, and provide completely tax-free withdrawals for qualified education expenses. Roth IRAs, on the other hand, allow tax-free growth and penalty-free withdrawals of contributions at any time. Unlike Trump accounts, Roth IRAs don’t restrict investment choices to a single index fund.
Financial adviser Zach Teutsch warned that “a family would need to be ‘shockingly sure’ that their child wasn’t going to college before it would make sense to invest in a Trump account instead of a 529” plan.
“The accounts’ tax benefits are also questionable,” said Sam Taube of NerdWallet. “Although they are advertised as tax-advantaged accounts, the way they work does not seem to be that different from how a taxable brokerage account would work.”
Regardless of these financial concerns, the accounts’ future hinges entirely on the Senate passage of Trump’s controversial $1.45 trillion “One Big Beautiful Bill,” which faces mounting Republican opposition over projections it would add $2.4 trillion to federal deficits.
The nonpartisan Congressional Budget Office also estimates the package would strip health coverage from nearly 11 million Americans.
Senator Rand Paul of Kentucky opposes it over deficit concerns. Senator Ron Johnson of Wisconsin has called the package “immoral” and “grotesque,” while Elon Musk has called it “a disgusting abomination” and said that, if approved, it would bankrupt America.
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