Ted Cruz confirms ‘dirty little secret’ about Trump Accounts — and it could change Social Security forever. What all Americans must know

The Accounts were created under President Donald Trump's tax and spending package and are designed as tax-advantaged investment accounts for children (2). Each account starts with $1,000, and parents can contribute up to $5,000 per year. Cruz described the child investment accounts as part of a larger conservative goal — moving Americans toward individually owned, market-based retirement accounts.

"The only way anyone has ever climbed the economic ladder is you pull yourself up one rung at a time," Cruz said. "Government policies should facilitate the means of ascent up the economic ladder."

He said the accounts could help expose millions of Americans to investing for the first time.

"Every child in America will experience the miracle of compound growth," Cruz continued. "Half of Americans do not own a single stock or bond. You are not going to climb the economic ladder if you have no investments."

Cruz also argued that the accounts could create "a new generation of capitalists" by giving children visibility into the companies their investments support.

The most explosive portion of Cruz's remarks came when he directly connected the accounts to future Social Security reform.

'More transformational than Social Security'

Conservatives have spent decades advocating for personal accounts that would allow workers to invest a portion of their payroll taxes privately rather than relying entirely on the current Social Security system.

As it stands, Social Security relies on funds managed by the SSA, such as the Old-Age and Survivors Insurance Fund, which are invested in bonds to make payments.

Founder and CEO of Altimeter Capital, Brad Gerstner, also present at the conference, weighed in after Cruz, "Social security has been a third rail in American politics and again ... this idea that we are trying to steal anything from anybody could not be a bigger falsehood.

"Today, we have government savings that go into a pension fund that you do not own," he continued. "Everybody in this country who works hard should enjoy the opportunity to climb the economic ladder."

Critics of the proposed change are quick to point to the increased risk associated with self-directed investing. It's also not the first time a Republican administration has proposed this kind of overhaul of Social Security.

Former President George W. Bush attempted a version of that reform in 2005, but the proposal collapsed after intense political backlash (3). The idea failed largely due to the rebranding of Bush's idea to include progressive price indexing, which the public perceived as a "40% cut in future benefits", per Forbes (4).

How TrumpAccounts will work

Cruz suggested Trump Accounts could gradually make Americans more comfortable with investment-based retirement systems.

"How did we get it done this time? Because we gave the money to babies, so the old people did not get pissed," Cruz said. "But you know what? Babies grow up."

He also predicted that within several years, "We will be able to go to parents and say, 'You know that Trump Account your kid has where you keep seeing the numbers go up and you are seeing this compound growth? Wouldn't you like to be able to keep a portion of your payments that you are paying already and instead of sending it to Uncle Sam, wouldn't you like to have a Trump Account just like your kid does?"

On the Trump Accounts website, details are already live.

The Accounts are long-term, tax-advantaged investment accounts for children, set to launch on July 5, 2026. They will function similarly to traditional IRAs, with stocks locked until the beneficiary turns 18 to ensure long-term growth.

Any U.S. child under 18 with a Social Security number can take part. Children born between January 1, 2025 and December 31, 2028, also qualify for a one-time $1,000 federal seed deposit. Older children may qualify for a $250 deposit.

Individuals can contribute $5,000 to these accounts annually. Employers can contribute up to $2,500 per employee's child, which counts towards that $5,000 limit.

Assuming average returns and inflation rates through your child's formative years, the Council of Economic Advisers estimates that a baby born in 2026 could be sitting on $303,800 by the time they're 18 years old — if parents contribute the maximum per year (5).

Parents can register children by filing IRS Form 4547 with their 2025 tax returns or via TrumpAccounts.gov.

But is that the right move?

Look before you jump

Critics such as Damilola Esebame of The State warn that privatization could expose retirement savings to stock market volatility while weakening one of America's largest guaranteed retirement programs (6).

"The accounts currently accept only cash, and every dollar gets invested into low-cost S&P 500 index funds with expense ratios capped at 0.1%," Esebame wrote. "If the rules change, millions of children already enrolled may end up with a completely different type of account."

Ben Henry-Moreland, a certified financial planner with Kitces.com, also raised this particular concern (7).

"The whole point of the requirement for holding low-fee index funds is to avoid speculative investing in single stocks, and reversing that rule would encourage much more speculative risk-taking in accounts that are meant for steady accumulation of retirement savings," he told CNBC.

That tradeoff is important to keep in mind as the math looks different depending on who's contributing, as well as on steady contributions and years of positive market returns.

The S&P 500 has historically produced strong long-term gains, but retirement savers do not experience "average" returns in a straight line. A downturn near the withdrawal age can drastically reduce the value of an account, just when the money is needed most.

Additionally, allowing America's wealthiest to donate stocks to Trump Accounts could unlock massive tax breaks. Under the current tax system, if someone donates shares that have appreciated via a direct stock transfer, the donor can claim a deduction for the full market value without paying capital gains tax on the appreciation (8).

That means a donor who bought shares for $1 million and later donated them valued at $5 million will avoid tax on $4 million of gains.

For the child receiving the account, that may look like a gift. For the donor, it can also function as a powerful tax-planning tool. That is why critics argue lawmakers should be careful before allowing stock donations into accounts designed for children. A program sold as a savings tool for families could also become a tax-efficient outlet for appreciated assets held by wealthy investors.

That said, the debate comes as Social Security faces a mountain of financial pressure. The program's trust funds are projected to deplete in the 2030s unless lawmakers intervene (9).

And while the politics surrounding Trump Accounts are deeply divisive, the underlying idea behind them — starting early and harnessing compound growth — is not.

Get to compounding

Even relatively small contributions invested consistently over time can snowball into meaningful wealth over decades. For younger families, especially, time is the most valuable investment asset available — time and compound interest (10).

That's part of the appeal behind apps like Acorns, which lets you automatically invest spare change from everyday purchases into diversified portfolios they own.

The platform also allows recurring investments starting with as little as $5, giving you another way to begin building a long-term investment for yourself — or your children — without relying on a government-sponsored account structure.

And, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey. All you have to do is set up a small recurring monthly contribution of $5.

Stay consistent

For many, the hardest part of investing isn't getting started — it's staying consistent. Platforms like Stash make this incredibly straightforward.

With over 1 million active subscribers and more than $5 billion in assets under management, the intuitive app lets you set daily, weekly, or monthly recurring investments that actually match your cash flow.