A screen displays information about Trump Accounts on the floor at the New York Stock Exchange in New York, Monday, July 6, 2026. (AP Photo/Seth Wenig)
The newly created “Trump accounts” began on the Fourth of July. If the accounts move the country toward private Social Security accounts, as the legislation’s sponsor Sen. Ted Cruz (R-Texas) suggests, it will be one of President Trump’s most consequential positive (as opposed to his numerous negative) economic policies.
First, we need to consider Social Security’s longstanding financial challenges, and then why Trump accounts could help address those challenges.
The Social Security system operates on a pay-as-you-go system. The payroll taxes workers and their employers pay — 12.4 percent of employee income, split between employer and employee — into the Social Security trust fund are used to pay current retirees.
For decades, workers paid in more than was needed to pay retirees, building a trust-fund surplus. That changed in 2010, when trust-fund payouts exceeded revenue (excluding interest). Social Security’s trustees recently reported, “reserves of the combined [Old Age and Survivors Insurance] and [Disability Insurance] Trust Funds declined by $160 billion in 2025 to $2.56 trillion.”
While $2.56 trillion may sound like a lot, the trustees project the trust fund will be depleted by 2034. If Congress doesn’t act, Social Security will only be able to pay 83 percent of scheduled benefits. It’s very unlikely Congress will let the situation get to that point, but there is little agreement about what to do.
Various members of Congress, economists and public policy groups have proposed cutting Social Security benefits for higher-income retirees, raising taxes and/or raising the retirement age, among other options. All of these are short-term fixes. They do not address the underlying actuarial problem: We have an aging population that’s retiring and a low birth rate. There were 5.1 workers per beneficiary in 1960; there are 2.8 workers per beneficiary today, and declining.
The only way to fix the problem is to transition to a private Social Security system, where workers and employers pay into a private retirement account (similar to an IRA) that grows over a person’s working life — and with Trump accounts, it could be over a person’s entire life.
Trump accounts have set up a workable private system. Starting on the Fourth of July, employers, states, nonprofits, family members or anyone can contribute toward an annual contribution limit of $5,000, though contributions from states or nonprofits are not subject to the limit. Tech entrepreneur Michael Dell has donated $6.25 billion for low-income children and Texas has expressed an interest in contributing to its citizens’ accounts. Some contributions are deductible, some aren’t.
The money must be invested in approved, broad-based mutual funds or exchange-traded funds. Distributions are prohibited during the growth period, which usually ends at age 18. Money can then be withdrawn penalty free for specific purposes, or for any purpose after age 59 and a half.
One red flag for fiscal conservatives is that Trump accounts obligate the government — which will run a $2 trillion federal deficit this year, adding to the $39 trillion federal debt — to deposit $1,000 into Trump accounts for those born in 2025 through 2028.
Cruz argues the contributions were necessary, telling the Milken Institute’s Global Conference in Los Angeles, “How did we get it [privatizing Social Security] done this time? It’s because we gave the money to babies so the old people didn’t get p‑‑‑ed.”
So far, some 6 million kids are signed up for the accounts, though only 1.5 million are newborns eligible for the $1,000 taxpayer contribution. That’s a small portion of the number Americans under the age of 18, but it’s a new program that may need some tweaking, and it will take time for more parents to enroll their children.
Critics make a fair point that calling them “Trump accounts” will likely alienate many Americans who don’t want to be associated with anything named after Trump. Of course, a future Democrat-controlled Congress and White House could officially change the name, refuse to reauthorize the $1,000 contributions after 2028 — or even end the program.
But as Cruz suggests, Trump accounts might just put a foot in the door toward privatizing Social Security. In 50 years, when the first wave of Trump-account holders (currently 17) begins to retire, those who made even modest contributions will likely retire very wealthy.
There’s nothing magical about it — it’s just the result of investing broadly in the stock market, compounded over decades. If Trump accounts succeed (a big “if”) and Americans begin to approach retirement with sufficient funds in their accounts, that will change the political dynamic.
Traditional Social Security might survive as a safety net program for those who faced struggles all their lives and never managed to accumulate any assets. But the vast majority of Americans, even Americans with modest earnings, would be able to retire with significant assets. Traditional Social Security will never achieve that goal.
Read the original article on TheHill.com
I think the first step should be to consolidate IRA and 401K and all of the other three-letter and three-digit retirement accounts into a manageable system. Only two tracks are needed– the pre-tax and the Roth accounts. Contribution limits and withdrawal rules need to be simplified and made fair.
Regarding Social Security, the only thing worse than allowing the trust fund to empty and benefits to be cut in six years would be to allow the system to keep growing unchecked as it has been since the early 1970’s. Implementing automatic benefit increases with provision to maintain solvency is one of the most irresponsible things to come out of Congress. The initial goal for reform should be to cushion the expected 2032 benefit reduction and not to extend solvency for the next 50 or 75 years with unchecked growth.
Sorry, I meant “Implementing automatic benefit increases with NO provision to maintain solvency…”