How Rich will a MAGA Account make a Baby?

[Anonymous]

So in new tax plan a weird thing that babies born will get $1,000 free to be invested in a stock account. Govt will fund. Claiming will secure their future.

Well math wise if you put $1,000 in stocks at birth and retire at 70. Given everything that will be normal retirement age for them. I did the math.

f $1,000 was invested in the S&P 500 index and compounded at its historical average of about 10% annually, it would grow to approximately $2,137,954 over 70 years.

But what are odds, parents or kids themselves will take the money as soon as given? In theory sounds great. But in reality very few will get rich.

Good idea or bad idea?

[Anonymous]

Isn't this...social security?

[Anonymous]

Anonymous wrote:Isn't this...social security?

Social Security will finally be abolished because "those people should have invested their MAGA account in VTSAX."

[Anonymous]

That 2M in 2095 dollars will be worth 200k in 2025 dollars so no one will be getting rich.

[Anonymous]

This is 95% getting cut in favor of keeping the tax rates on the rich lower.

[Anonymous]

Anonymous wrote:So in new tax plan a weird thing that babies born will get $1,000 free to be invested in a stock account. Govt will fund. Claiming will secure their future.

Well math wise if you put $1,000 in stocks at birth and retire at 70. Given everything that will be normal retirement age for them. I did the math.

f $1,000 was invested in the S&P 500 index and compounded at its historical average of about 10% annually, it would grow to approximately $2,137,954 over 70 years.

But what are odds, parents or kids themselves will take the money as soon as given? In theory sounds great. But in reality very few will get rich.

Good idea or bad idea?

If it happens which I doubt this money will end up in the pockets of Wall Street. There is effectively no regulation on Wall Street at this point. They will take money by hidden fees and pushing to invest in special house accounts that generate commissions. The only people who will get rich are those with connections who are able to exploit the suckers.

If we look at 401k’s average return for the past 10 years it was 5-8% vs the S&P 12.4%. Inflation for that period was 3.2%. There’s no indication that this type of exceptional returns will continue in the S&P for the next 10 - 20 years. Trump has changed the underlying conditions of the US economy. Look for much lower returns with higher inflation. So like the 1970’s. If you are lucky maybe a 1-2% return over 10 years.

Oh the deficit is going to be crazy high. The republicans and Trump will prioritize tax cuts to the rich. There will not be any checks going out to the little people. More likely tax increases and reduced services. The states are going to have to make up the reduction in federal money. So they will raise taxes and fees also.

[Anonymous]

Anonymous wrote:

If we look at 401k’s average return for the past 10 years it was 5-8% vs the S&P 12.4%. Inflation for that period was 3.2%. There’s no indication that this type of exceptional returns will continue in the S&P for the next 10 - 20 years. Trump has changed the underlying conditions of the US economy. Look for much lower returns with higher inflation. So like the 1970’s. If you are lucky maybe a 1-2% return over 10 years.

The outright lunacy of people on this forum….

Boggles the mind.

[Anonymous]

Your child will never see it. There are almost no protections in that idea.

[Anonymous]

Anonymous wrote:So in new tax plan a weird thing that babies born will get $1,000 free to be invested in a stock account. Govt will fund. Claiming will secure their future.

Well math wise if you put $1,000 in stocks at birth and retire at 70. Given everything that will be normal retirement age for them. I did the math.

f $1,000 was invested in the S&P 500 index and compounded at its historical average of about 10% annually, it would grow to approximately $2,137,954 over 70 years.

But what are odds, parents or kids themselves will take the money as soon as given? In theory sounds great. But in reality very few will get rich.

Good idea or bad idea?

saddles.

Your math is waaaaay off. It's more like 6% return NPV so the value is closer to $56k. No one will have a "secure future" with this.

[Anonymous]

10% nominal return for 65 years is $117k when starting from $1k.

Inflation adjusted real return of 7% is $49k.

[Anonymous]

Anonymous wrote:…
Well math wise if you put $1,000 in stocks at birth and retire at 70. Given everything that will be normal retirement age for them. I did the math.

f $1,000 was invested in the S&P 500 index and compounded at its historical average of about 10% annually, it would grow to approximately $2,137,954 over 70 years.

Good idea or bad idea?

I put your numbers ($1000 at 10% over 70 years compounded annually) in the compounding interest calculator at investor.gov and at the end you’d have 790k. Thats a pittance 70 years from now.

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

[Anonymous]

Anonymous wrote:

Anonymous wrote:…
Well math wise if you put $1,000 in stocks at birth and retire at 70. Given everything that will be normal retirement age for them. I did the math.

f $1,000 was invested in the S&P 500 index and compounded at its historical average of about 10% annually, it would grow to approximately $2,137,954 over 70 years.

Good idea or bad idea?

I put your numbers ($1000 at 10% over 70 years compounded annually) in the compounding interest calculator at investor.gov and at the end you’d have 790k. Thats a pittance 70 years from now.

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

Yes, and at a real rate of 7% (a pretty optimistic assumption), you are down to $114k. There is no magic money.

[Anonymous]

Anonymous wrote:That 2M in 2095 dollars will be worth 200k in 2025 dollars so no one will be getting rich.

Correct, but remember that the average 65 year old only has $272k in their 401k. And many of them have nothing at all.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

If we look at 401k’s average return for the past 10 years it was 5-8% vs the S&P 12.4%. Inflation for that period was 3.2%. There’s no indication that this type of exceptional returns will continue in the S&P for the next 10 - 20 years. Trump has changed the underlying conditions of the US economy. Look for much lower returns with higher inflation. So like the 1970’s. If you are lucky maybe a 1-2% return over 10 years.

The outright lunacy of people on this forum….

Boggles the mind.

DP that is spot on. We are going in to another 1970’s lost decade. It will be bleak.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

If we look at 401k’s average return for the past 10 years it was 5-8% vs the S&P 12.4%. Inflation for that period was 3.2%. There’s no indication that this type of exceptional returns will continue in the S&P for the next 10 - 20 years. Trump has changed the underlying conditions of the US economy. Look for much lower returns with higher inflation. So like the 1970’s. If you are lucky maybe a 1-2% return over 10 years.

The outright lunacy of people on this forum….

Boggles the mind.

DP here...what did they say that was wrong?