One big, beautiful bill

The Republican Party has introduced an ambitious initiative within its \$4 trillion fiscal plan, known as the “One Big Beautiful Bill.” The proposal, led by Senator Ted Cruz, introduces the so-called “MAGA Accounts” (Money Accounts for Growth and Advancement), designed to provide a financial boost for American newborns. These accounts, which grant an initial \$1,000 contribution from the government, aim to foster a culture of saving and investing from childhood, promoting compound interest and participation in the free enterprise system.

But how do these accounts compare to existing investment options such as 529 plans and custodial Roth IRAs? Below, we explore this initiative in detail, its features, implications, and how it differs from other savings alternatives.

**What are MAGA Accounts?**

MAGA Accounts are a new savings vehicle proposed for children born between 2024 and 2028 in the United States, with a Social Security number. Each account would receive a \$1,000 initial contribution from the federal government.

In addition, family members, friends, and employers could contribute up to \$5,000 annually. The funds would be invested exclusively in U.S. stocks, aiming to capitalize on long-term market growth.

These accounts would grow tax-free until the beneficiary turns 18, at which point the funds could be used for education, starting a business, buying a home, or vocational training. Upon withdrawal, capital gains tax would apply, making them fiscally attractive.

Senator Ted Cruz, the main proponent of the initiative, argues that MAGA Accounts aim to transform citizens’ relationship with the economy. “This gives every child in America the miracle of compound growth—the ability to accumulate wealth, which is transformational,” Cruz stated. According to his calculations, a child receiving the \$1,000 initial deposit and annual \$5,000 contributions at a 7% growth rate could accumulate \$170,000 by age 18 and up to \$700,000 by age 35.

To assess the potential of MAGA Accounts, it’s crucial to compare them to already available savings and investment options like 529 plans and custodial Roth IRAs.

**529 Plans** are savings accounts specifically designed for educational expenses such as college tuition, books, and in some cases, student housing costs.

These accounts allow for substantial contributions (up to \$18,000 annually per donor in 2025, according to tax exemption limits) and offer tax-free growth if funds are used for qualified educational purposes.

However, their use is primarily restricted to education-related expenses, and withdrawals for other purposes incur penalties and taxes.

Unlike 529 plans, MAGA Accounts offer greater flexibility, as funds can be used for education, housing, business, or vocational training. Additionally, the government’s initial \$1,000 contribution is a unique incentive that 529 plans do not offer. However, while 529 plans allow for diversified investments (bonds, mutual funds, ETFs), MAGA Accounts are limited to U.S. stock indexes, which could increase risk in the event of prolonged market downturns.