Republican firebrand Ted Cruz isn’t the most obvious inspiration for Irish policymakers, but his new MAGA Account proposal echoes the Programme for Government’s vague plan to introduce managed savings accounts for newborns.
MAGA, in this case, stands for “Money Account for Growth and Advancement,” not the usual red-hatted version. Under Cruz’s plan, every American newborn would get a $1,000 stock market account, with friends and family allowed to contribute up to $5,000 annually. From age 18, the money could be used for college, a first home or to start a business.
The idea was welcomed by Trump supporter and hedge fund billionaire Bill Ackman, who has long proposed giving each newborn $6,750 to invest in index funds until retirement – enough to grow into $1 million by age 65 at annual equity returns of 8 per cent.
Adjusted for 3 per cent annual inflation, that figure shrinks to around $161,000, but the principle still holds. As Cruz puts it, Americans would “experience the miracle of compound interest”.
There’s bipartisan momentum behind the general concept. Vanguard, JPMorgan and BlackRock’s Larry Fink all support some version of early investment accounts, as do some Democrats.
Some US research finds that so-called baby bonds could reduce the racial wealth gap. As Stocktake argued in January, the real lesson is this: don’t just save more – save sooner, and smarter. Choose low-cost index funds, and let time do the heavy lifting.
