The Trump Account vs CT baby bonds: Take the free money from both
- Guy
- Dec 8
- 2 min read
Connecticut Treasurer Erick Russell's apparent desire to position the state's Baby Bonds program as an alternative to the new federal "Trump Accounts" misses a crucial point for qualifying families: these are complementary not competing benefits If a Connecticut baby's family qualifies for both, the Treasurer's advice should be a resounding, "Welcome both—it's free money!"
Under the CT program, the State invests $3,200 for each Connecticut baby born to families at the poverty level i.e. qualify for CT HUSKY (CT's medicaid program). The money is held in a state-managed trust and is expected to grow between $11,000 and $24,000 (Note: while the long-term goal is growth, state investment returns have not always been positive) by the time the child is an adult. The money can be withdrawn starting at age 18, but the recipient must prove Connecticut residency and have passed a state-approved financial literacy test.
The Trump Account promises $1,000 for new babies born from 2025 to 2028, regardless of income level as long as the child is a U.S. citizen and both parents have social security numbers. It's structured like a tax-deferred retirement account for children. Whether the child qualifies for the $1,000 or not, a Trump Account may be open for any child under the age of 18 and it may be funded at $5,000 every year. Investments must be made in qualified funds tracking American equities. Savings grow tax-deferred until the child turns 18 when the account is rolled over to an IRA. The growth portion of the account is taxable. Early withdrawals for higher ed or first home purchase are permitted without penalty.
A low-income Connecticut family could potentially secure $4,200 in initial seed capital ($3,200 from the state and $1,000 from the federal government) for their child. Treasurer Russell's advocacy should focus on the single message: enroll in both to maximize this public investment in the next generation.
Between the Lines: You need to notify the IRS by filling out a tax form. And the tax form number is....wait for it...IRS Form 4547.