Money Accounts For Growth And Advancement (MAGA)

 One of the lesser reviewed parts of the “Big Beautiful Bill” can start kids on a lifetime of investment.

One of my great regrets is a lack of investment knowledge in my younger days. I started making money in my teen years, but like many a young man, wasted it on countless things. Now as I’m older (if not much wiser) I’ve started my two girls on investment with an IRA. Achieving a financial goal is an intersection of two critical factors, money and time. The more time you have the less money you need. The less time you have, the more money you need.

The BBB creates the MAGA, or “Trump Accounts” for children born in the US from 2025 to 2028. The government, i.e., taxpayers, deposit $1, 000 cash into an account for each child (about 3.6 million a year). The cost to taxpayers is roughly 3.6 billion a year (we can afford it, Big Bird and his gang just got furloughed). It grows tax deferred similarly to an IRA. Some key features:

1. Parents or other family members (Grandma, Grandpa!) can contribute up to $5,000 a year until age 18.

2. Assets are invested in a “low-cost stock mutual funds or exchange-traded funds tracking a U.S. stock index, like the S&P 500.”

3. Withdrawals are prohibited until the year the child turns 18, then they are subject to similar restrictions as an IRA, with two key exceptions. Paying for college (unlimited) and purchasing a first home (limited to $10,000).

The Tax Foundation review (and others) found a traditional 529 (i.e., Education IRA) may be a better vehicle for college expenses. However, with “Trump Accounts” the potential for long term, generational wealth creation is enormous.

Suppose John Doe is born and only the $1,000 is deposited. Assume a 10% yearly return (actually slightly lower than historical average), after 18 years the initial investment is up to $5,600. Now if the family can add $2, 000 a year until high school graduation, that’s $101,000 in the bank. Max the contribution out at $5, 000 a year, our kiddie starts out life with $243, 500 in assets.

Let’s say John doesn’t use the $243, 500 for college but leaves that in the bank. At age thirty, he takes out $10,000 for his first home. He still has more than $750, 000 in retirement savings. He leaves that alone for the next three decades, he enters his retirement years with over 13 million in this account.

Now that is a best-case scenario, but the Rule of 72 is a beautiful thing.

A staffer at the Urban League complained “lower-income Americans might not have the ability to contribute to the account, ‘I don’t see a way that this reduces wealth disparities.’” Fair enough, let’s see what the initial investment does over time. Start with $1,000 at birth, assuming retirement at 67, this will grow to $593, 000.

Now that is a lot less money in 2092 than 2025, but still a major asset one controls for their life. Assume Joe and Jane Doe marry, have three children, and when they retire their accounts have almost 1.2 million in assets. If their accounts are half that when they pass, each child will inherit around $200,000. That is life changing money for millions,  at the cost of less than four billion a year.

More than just this money, the “Trump Accounts” will hopefully encourage younger people to invest at an earlier age. The more time you have, the less money you need now, and the greater payoff at the end. Also the asset is yours to keep and distribute as you see fit, building wealth for generations of your family.

One of the (many) disappointments of the George W Bush years was his failure to get partial privatization of Social Security enacted. I will hit my retirement age just as Social Security is due to start going broke (lucky Gen X!). But this will give Generation Beta (hey, I didn’t choose the name! ☺ ), and hopefully others in the future, a chance to start growing wealth early. And as people see the advantages of early investment, they will demand more of it, and less of government-controlled pensions. Let’s call the “Trump Accounts” a good first step.

Michael A. Thiac is a retired Army intelligence officer, with over 23 years experience, including serving in the Republic of Korea, Japan, and the Middle East. He is also a retired police patrol sergeant, with over 22 years’ service, and over ten year’s experience in field training of newly assigned officers. He has been published at The American Thinker, PoliceOne.com, and on his personal blog, A Cop’s Watch.

Opinions expressed are his alone and do not necessarily reflect the opinions of current or former employers.

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