Trump accounts will become a "ubiquitous employee benefit, just like 401(k) matches," Sen. Ted Cruz, R-Texas, said Thursday.
Cruz is one of the architects of the accounts, formerly called Invest America accounts.
"Right now, there is more than $12 trillion in 401(k) accounts," Cruz said at the Investment Company Institute's Leadership Summit in Washington. "Trump accounts are 401(k)s for kids. It's the same thing. And in very short order, there are going to be trillions of dollars in these accounts."
Cruz noted that employer matches and contributions from philanthropists will accelerate the accounts' growth.
"We've seen employers across the country announce that they're either contributing to Trump accounts for the kids of their employees or they're matching," Cruz continued. "I think in short order, this will become a standard, in fact, ubiquitous employee benefit, just like 401(k) matches are. Any major employer is going to offer a 401(k) match or a 401(k) contribution; the same will be true for Trump accounts."
Cruz also noted contributions announced by Michael and Susan Dell, as well as Bridgewater Associates CEO Ray Dalio seeding kids' accounts in Connecticut and Altimeter Capital CEO Brad Gerstner doing so in Indiana.
The Internal Revenue Service said that as of March 31, taxpayers have signed up more than 4 million children for tax-favored Trump accounts.
The IRS issued proposed regulations March 9 around the pilot program for the accounts.
Contributions to Trump Accounts can be made starting July 4.
"Every child in America will have a personal investment account opened for them," Cruz said. "Newborn children will have it seeded with $1,000 and parents, family and employers can put up to $5,000 per year in a tax-advantaged account, like a Roth IRA, and all of that money will be invested in the stock market, the S&P 500, broad-based equity index."
Take, for instance, a girl born this year, Cruz said.
"She'll have the account opened this year, she'll have $1,000 automatically put in," Cruz said. "If her parents or family or an employer puts $5,000 a year, if you assume the historic rate of growth of the S&P 500, which has been 7% after inflation, by the time that girl turns 18, she'll have $170,000 in her account."
If she keeps contributing $5,000 per year, "by the time she's 35 she'll have more than $700,000 in her account," Cruz added.
Trump accounts are also "Social Security personal accounts," Cruz maintained.
"Conservatives have been trying to do Social Security personal accounts for 50 years and have failed over and over again," he said.
"How did we get it done here? We got it done here because we created the accounts and gave the money to babies, so the old people didn't get pissed. But the nice thing is that babies get old. That little girl who's born today will turn 70. And the math is simple: that if she is contributing, if her family's contributing, if employers are contributing, when she's 70, she will have several million dollars in that account."
The author can be reached at melanie.waddell@arc-network.com.
Credit: AP Photo/Gabriela Passos
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