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When I first saw these headlines, I thought it had to be satire:

Babies get a what now?

But no, it’s real.

Turns out, tucked into the GOP’s new “Big, Beautiful Bill” is a surprise line item: a government-seeded investment account for every newborn from 2025 to 2028.

It’s being nicknamed the “Trump Account” (because of course it is) and the idea?

Give kids a head start. Let the money grow. Unlock it when they hit adulthood.

But like most things in the tax world, the headline doesn’t tell the whole story.

Because while it sounds like free money, the fine print reveals a few important twists, and some surprising tradeoffs.

Let’s break it down…

How does the “Trump Account” actually work?

In a nutshell:

• Every U.S. baby born between 2025 and 2028 gets a $1,000 investment account (but only if parents opt in on their tax return)
  

• Anyone (parents, relatives, even employers) can add up to $5,000 per year.
  

• The money is invested in a U.S. stock index fund, grows tax-deferred, and can’t be accessed until age 18.
  

• At 18, kids can use up to half the account for things like college, starting a business, or buying a home.
  

• At 25, they can access the full amount for those same (qualified) purposes.
  

• At around 30, they can use it for essentially anything with no penalty.
  

• Pull it out early for the wrong reason? You’ll owe income tax plus a 10% penalty.

What you really need to know:

• Not a 529 substitute: Unlike 529 plans, withdrawals aren’t tax-free (even for education). They’re taxed as ordinary income.
  

• No deduction for parents: You won’t get a tax break for contributing but employers and nonprofits can claim a deduction.
  

• Limited control: You can’t choose investments, only pre-selected index funds are allowed (and accounts must be managed by approved financial institutions).
  

• Financial aid impact: These accounts are likely treated as student-owned assets, which could reduce need-based aid eligibility.
  

• Penalty risk: Withdrawals before age 30 for non-qualified reasons = 10% penalty + income tax.

Super hypothetical example: If you had a 6% return, the original $1,000 could grow to about $2,854 by age 18. Not bad, but also not transformational.

Is it worth using?

There are a few pros and cons to consider (and of course always speak to a financial pro in your area before making any decisions) but in my opinion…

Likely YES if:

• You’ve already maxed out a 529

• You want a long-term savings tool for your kid (beyond just school)

• You just want the free $1,000 (eh, might as well grab it?)

Maybe NOT if:

• You’re focused on college savings (I think 529s still win here as they offer tax-free growth and tax-free withdrawals for qualified education expenses, plus more investment flexibility)

• You want tax-free withdrawals or tax deductions on contributions

• You don’t want to deal with restrictions

The bottom line:

At the end of the day, it’s not every year the government offers to open an investment account for your kid, so it’s worth understanding how it really works.

It might not be the best tool in the shed, but it is a start. And sometimes that’s all you need to spark a bigger financial plan.

Curious about what else is buried in the “Big Beautiful Bill” or any other topics?

👉Hit reply and tell me what you want decoded next week (yep, I read every email!)

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If you want more resources on building wealth as a solopreneur/entrepreneur, check these out:

• The Solo 401k handbook

• The Roth IRA handbook

• The Self-Directed IRA handbook

• The Guide to Paying Less in Taxes

• What is a Solo 401k?

• How to Open a Solo 401k