The Thanksgiving Leftover stocks of 2025 turned in a bad showing during June 2026. The ten worst performing stocks of the S&P 500 (Index: SPX) in 2025 collectively dropped by both measures we use to track their performance.

Our market capitalization-based weighted index of the ten stocks went from holding 92.2% of their value on the day after Thanksgiving 2025 as of 26 May 2026 to 84.6% of that value through the close of trading on 24 June 2026. But that wasn't low as the equal-weighted index, which went from 87.2% to 82.7% of their post-Thanksgiving Day 2025 value as determined by that method.

The S&P 500 was also down month over month, dipping from 109.8% to 107.4%. However, as these values are both over 100%, the index is holding gains, putting its performance on a much better position than that of its ten laggards. The following chart shows how the performance of both the market cap-weighted and equal-weighted Thanksgiving Leftover indices compare with the entire S&P 500 index.

Not all is dismal among the worst performing S&P 500 stocks of 2025. Three, Molina Healthcare (NYSE: MOH), Dow Inc. (NYSE: DOW), and Deckers Outdoor (NYSE: DECK), are outperforming the S&P 500 index, but in the case of Dow, not as strongly as it had been.

The remaining seven Thanksgiving Leftover stocks of 2025 however are doing worse, which can be seen in the next chart:

From here, we'll focus on the stocks of the three firms to see the biggest month-over-month declines:

Dow Inc. (NYSE: DOW). The chemical giant's stock price has risen and fallen in recent months in conjunction with the disruptive impact of the geopolitical event of the Iran war. The firm, which announced a restructuring in January 2026, benefited from the event's effect upon its international competition, sharply boosting its profits while trade from the region was affected by the conflict. But that benefit has increasingly dissipated as the ceasefire reached in late March 2026 has held, which benefits Dow's biggest international competitors as they recover from the disruption. The company is now facing a delayed market evaluation of the effectiveness of its restructuring.

The Trade Desk (NASDAQ: TTD) continues to find new ways to disappoint investors with its prospects for a turnaround still in doubt. The outlook of the company's core digital advertising business continues to be hammered as the disruption from AI technologies makes it increasingly vulnerable to competition. At the same time, The Trade Desk has also endured management turmoil and in June 2026, welcomed its third CFO since the beginning of the year.

Keep in mind that The Trade Desk's stock has been doing badly since the end of 2024. Its stock price fell by 66.3% by Thanksgiving 2025 to earn its place on the list of 2025's Thanksgiving Leftover stocks. Since Thanksgiving 2025, The Trade Desk's stock price has gone on to lose 55.3% of that already much reduced value.

Lululemon Athletica (NASDAQ: LULU) is another Thanksgiving Leftover stock facing stronger competition while undergoing extreme management turmoil. Here, the battle between the company's board of directors and its founder Chip Wilson have reached a truce, with the now-outsider Wilson successfully getting his two candidates on the board, which he can use to change the company's direction. Unfortunately, there's a lot of opportunity for improvement as the company's product lines failed to generate either positive sales growth or earnings in its North American markets.

Running struggling businesses like these is not easy. Turning around a struggling business is likewise hard, but there is a lot of potential value that can be realized if it can be successfully done. The trick for investors considering these stocks as potential turnaround stories is to sort the proverbial wheat from the chaff. Our sense from sampling of companies we highlighted in this edition is that that some 2025's Thanksgiving Leftover stocks might qualify as positive turnaround stories, but are taking an excessive amount of time to get themselves properly sorted out. It's no wonder those companies have continued losing substantial value in 2026, dragging down the market-cap and equal-weighted groups as a whole.

Imagine this scenario. You've just left your old job, but you still have a 401(k) retirement savings account at your former employer into which you had been making pre-tax contributions. You're ready to move that money into an Individual Retirement Account (IRA) where you're thinking about rolling it over into a Roth IRA so it can grow completely tax free into the future. But if you do, you'll have to pay income taxes on the amount you roll over, which you'll have to have withheld out of the money that's in your pre-tax account because you don't have the cash to otherwise pay them.

How much of those pre-tax savings will you have to have withheld to pay those income taxes? And how long will it take you to recover that money with the tax-free growth of the post-rollover amount invested in the Roth IRA?

Believe it or not, these are questions that many Americans may find they need to answer several times during the course of their working lives. In 2025, about half of working Americans were contributing money directly from their paychecks to 401k-type plans through their employers, with most making their contributions on a pre-tax basis.

At the same time, about half of Americans will change employers after about four years on the job. If they've been making pre-tax contributions to their retirement savings, they'll have these exact questions.

Which is why we've built the following tool! Here, we'll need you to enter the amount of money you might be looking to convert from a pre-tax retirement savings account to a Roth IRA and your marginal income tax rate for the tax year in which you'll make the change, assuming the taxes withheld will have to come out of your accumulated pre-tax retirement savings. We'll then estimate the amount of taxes to be withheld and how long your tax-free savings will take to recover back to your pre-tax savings amount. If you're reading this article on a site that republishes our RSS news feed, click here to access a working version of this tool!

In using this tool, the marginal federal tax rate is the one that applies when you add the amount of pre-tax income you're seeking to roll over into a Roth IRA to your expected taxable income for the year. For our default example, we've set the marginal federal income tax rate to be 22%, which applies to the following taxable income amounts for the indicated income tax filing status:

• Single or Married filing separately: $48,476 - $103,350
• Married filing jointly: $96,951 - $206,700
• Head of household: $64,851 - $103,350

The expected growth rate of the tax-free investment is set at 9%, which is rounded down from the average rate of return for an investment in the S&P 500 of any duration in the years since January 1871.

With these defaults and a pre-tax amount of $24,000, the tool finds the amount of income taxes to be withheld is $5,280, which reduces the amount of funds being rolled into a Roth IRA down to $18,720. If it grows at an average of 9% a year, the amount rolled into the Roth retirement account would take 2.88 years to recover its pre-tax value.

Since those default values may be very different from ones that might be relevant for you, you're welcome to change them to ones that apply for whatever scenario you'd like to consider.

In Part 2, we'll use the same math to explore a different scenario for executing a pre-tax to Roth rollover that can lead to a potentially better outcome for investors considering executing this kind of strategy.

Image Credit: Microsoft Copilot Designer. Prompt: "A digital art concept of a pre-tax retirement account being rolled over into a Roth IRA that shows income taxes being paid out of the pre-tax retirement account".

Admittedly, we've only been following the ten worst performing component stocks of the S&P 500 (Index: INX) in 2025 for the last four months, but we're starting to think that many, if not most, of these stocks would not have made very good investments during that time.

If you're just joining this series, the Thanksgiving Leftover Stocks are a group of ten stocks that Seeking Alpha's Jason Capul identified as "Thanksgiving leftovers no one wants". Four month later, that's mostly true, but with one notable exception.

That exception is Dow Inc. (NYSE: DOW). Back on 28 November 2025, the chemical industry giant was trading at $23.85 per share. Four months later, through the close of trading on 25 March 2026, the company's share price has risen to $39.63. Or rather, its value has increased to be 166% of what it was on the day after Thanksgiving 2025, as the company's outlook has brightened in response to the geopolitical turmoil disrupts the supply chains of its foreign competition.

The following spaghetti chart presents the performance of each of the ten Thanksgiving Leftover Stocks with respect to the S&P 500, each indexed with respect to their closing values on 28 November 2025.

Aside from Dow, the only other company whose stock has registered a sustained increase is Deckers Outdoor (NYSE: DECK). The footwear designer behind popular sneaker and boot brands like Hoka, Teva, and UGG has seen its stock grow to $100 per share at the close of trading on 25 March 2026, 122% of its post-Thanksgiving Day 2025 level.

The remaining eight Thanksgiving Leftover stocks are doing less well than the S&P 500, which itself is just 96.2% of its day-after-Thanksgiving-Day value. Five of these eight firms are bunched within ten percent of the S&P 500's level, but the remaining three are doing much, much worse. Here's a quick summary of their share prices on 25 March 2026:

• Factset Research Systems (NYSE: FDS) - Share Price: $193.78 (69.9% of 28 November 2025 value)
• Gartner (NYSE: IT) - Share Price: $150.23 (64.5% of 28 November 2025 value)
• Trade Desk (NASDAQ: TTD) - Share Price: $21.97 (55.5% of 28 November 2025 value)

We covered The Trade Desk's decline in the previous edition, but observe the ad-tech firm's ongoing implosion has recently gotten worse as an audit firm advised its clients to avoid it. Through this point of 2026, The Trade Desk is the worst performing component stock of the entire S&P 500 index.

The other two poor performers, Gartner and FactSet, aren't far behind. Gartner, an IT research firm and consulting house whose business model is directly in the crosshairs of AI technology, which promises to do much of the same things that Gartner does at much lower costs. Financial data provider FactSet faces a very similar existential challenge from AI technologies, which the trend for its stock price is capturing.

As for how 2025's Thanksgiving Leftover Stocks are doing as a group, we find they are underperforming the S&P 500. If we treat them like an equal-weighted index, they're doing horribly, but if we weight them by their market capitalization, like the S&P 500 itself, they're still doing worse, but not anywhere near as badly. The following chart visualizes how they've done during the last four months:

Perhaps all this will change in the next month when we next update how 2025's Thanksgiving Leftover stocks are doing in 2026. Or not. If you were going to place a bet on the outcome, would you take the over or the under?

When we reviewed the carnage among Business Development Companies, or BDCs, when recapping February 2026's dividend decreases, its concentration within this sub-sector of the financial services sector of the U.S. economy really stood out.

BDCs make their money by loaning money they either raise from investors or borrow themselves to small- and medium-sized enterprises that can't raise money by going public and selling stock and also financially distressed businesses. The business models of most established BDCs involve borrowing money, then loaning it back out at higher interest rates, where they pocket the difference.

That makes the profit margins of BDCs vulnerable to rate cuts. Because their loans are tied to the Federal Funds Rate, when the Fed cuts that rate, it negatively impacts BDC profits. In the last three years, BDCs have gone from a rising or high interest rate environment (March 2023 through August 2025), to a falling rate environment (September 2024 through December 2025).

The performance of the VanEck BDC Income Exchange Traded Fund (ETF: BIZD), which includes over 30 BDCs in its market-cap weighted index, gives a good sense of how BDCs performed in these different environments. The following chart shows BDCs rising or flat in the rising rate environment, but then either stalling or falling as the Fed shifted gears into its rate cutting mode.

But that's not the whole story. During the rate cutting period, which initiated the pressure on BDC profits, BDCs have had to cope with the DeepSeek AI shock, peaking just ahead of that event on 19 February 2025. Then they faced the Liberation Day global tariffs shock event of 2 April 2025, plunging with the rest of the market, before going on to recover. That lasted until August 2025, when the return of rate cuts initiated a new downtrend that was followed in January 2026 with a new AI shock event that undermined the business prospects of the Software-As-A-Service (SaaS) firms. Many of which were getting their funding to grow from BDCs.

With AI technologies seemingly set to destroy any potential profitability these firms had, many BDCs were suddenly faced with having to write down large portions of their portfolios. But, not all BDCs are in that boat.

When we looked at the stock performance of individual BDCs, we found a clear characteristic that divided them. That characteristic is their governance and what quickly became evident was that internally-managed BDCs were generally outperforming BDCs whose investments are managed by external parties.

To illustrate that difference, we randomly selected six externally-managed BDCs to compare their performance against an equal number of internally-managed BDCs over the last three years. Here is a list of the BDCs in our performance sample:

Let's get to the results. The following chart visualizes the relative performance of the stocks of the two kinds of BDCs:

We've shown the 3-year returns for the benchmarks of the S&P 500 (Index: SPX) at 72.01% and BIZD at -10.79% to show how they compare against the range of the two categories. The externally managed BDCs range from a high of +2.79% to a low of -29.22%, with four of the six BDCs having a negative return.

By contrast, the internally managed BDCs range from a high of +44.22% to a low of -16.96%, with two of the six BDCs having a negative return.

But it's not just recent market events driving that outcome. In the next two charts, we show how the sample of internally managed and externally managed BDCs compare with the performance of the S&P 500 over the last three years. The first chart tracks the internally managed BDCs:

The next chart follows the externally managed BDCs over the same period.

We find the internally-managed BDCs have sustained better performance than the externally-managed BDCs over all portions of this three year period, which can be seen in their relative performance being closer to that of the benchmark S&P 500 index. That better performance occurred both in a period in which rising interest rates provided BDCs with a tailwind and the current period in which falling interest rates are providing fierce headwinds against the BDCs.

When we started this exercise, we thought we'd mainly be discussing the role of how changing interest rates have affected the performance of the BDC sub-sector of the financial services industry, leading so many of these firms to cut their dividends in recent months. We didn't expect to run into a more interesting question: how much does management matter in a publicly traded company? In the case of BDCs, whether the people managing their lending business work directly for the firm or are employed outside of it would appear to have a significant impact affecting the returns of the shareholders who own the companies.

Image credit: Microsoft Copilot Designer. Prompt: "A cartoon illustrating a Business Development Company that is internally managed versus a BDC that is externally managed", the result of would appear to succinctly explain at least one reason why the outperformance of internally-managed BDCs over externally-managed ones exists!

On the day after Thanksgiving 2025, we launched a new series in which we'll track the 10 stocks of the S&P 500 (Index: SPX) that Seeking Alpha's Jason Capul headlined as "Thanksgiving leftovers no one wants".

Capul identified the ten worst performing stocks of the S&P 500 in 2025, which raised a question for us. Would a Dogs of the Dow investing strategy work for the year's worst performing component stocks of the S&P 500?

We decided we're going to find out. We'll track how these stocks collectively perform up through Thanksgiving 2026 using two popular methods. The first method is the simplest: we created an index with an equal number of shares of each company's stock in it.

For the second method, we recorded the market capitalization of each company's stock on Friday, 28 November 2025 and added the results together to find their combined market capitalization. Then we calculated the percentage of each company's market cap with respect to that total to determine how much of a hypothetical investment would have to go into buying each stock at their closing prices recorded on 28 November 2025. The following table presents the results of that exercise:

We've also indicated which of these ten stocks pay dividends in the table. Here, each of three dividend payers in this collection of stocks paid quarterly dividends in December 2025 and January 2026. For the equal-weighted portfolio, which would have cost $1,143.55 for one share of each of these ten stocks at the end of trading on 28 November 2025, the effective quarterly dividend payout totaled $2.17. That's the equivalent of an annual yield of 0.76%.

Meanwhile, the market capitalization weighting gives a slight boost to the contribution of the dividend-paying members of this group of stocks. Their annual yield is 0.86% thanks mainly to dividend payer Chipotle's largest-in-the-group market cap.

These dividend yields are tiny. So much so they will make very little difference in the total return of our hypothetical investments in the Thanksgiving Leftover stocks during the course of the year we'll be following them. Our plan is to track them behind the scenes while reporting the performance of the two basic portfolios without dividend reinvestment on a monthly basis. When we reach the conclusion of this series on the day after Thanksgiving 2026, we'll report how dividend reinvestment would have affected the total returns for both portfolios.

Now that we've covered how we set up our two hypothetical portfolios, let's see how they were doing through the close of trading on 27 January 2026, two months after Thanksgiving 2025:

Since Thanksgiving 2025, both the equal-weighted and market-cap weighted portfolios of these ten Thanksgiving Leftover stocks have outperformed the S&P 500. In December, the equal-weight portfolio did better than the market cap-weighted portfolio, but that reversed in January 2026 with the market cap-weighted version performing better. Through 27 January 2026, we find the market cap-weighted index of 2025's Thanksgiving Leftover stocks is worth 106.7% of their starting value, while the equal-weight portfolio of the same stocks has grown to be 104.5% of its initial level. The S&P 500 has likewise increased, but to just 101.9% of its value on 28 November 2025.

At two months into this series, it's far too early to say the "Thanksgiving Leftover" investing strategy will beat the S&P 500 by the time Thanksgiving 2026 rolls around. The early indication however is that the Thanksgiving Leftover investing strategy is capable of beating the index by a significant margin.

We'll see if that's still true near the end of February when we have a full quarter of stock price changes to consider!

Image Credit: Microsoft Copilot Designer. Prompt: "A logo to feature 'Thanksgiving Leftover Stocks'".

Would the Dogs of the Dow investing strategy work for the year's worst performing component stocks of the S&P 500 (Index: SPX)?

We're asking that question because Seeking Alpha's Jason Capul posted an article with the irresistibly clickbait title of "Thanksgiving leftovers no one wants: 10 worst S&P 500 stocks of 2025" just before the Thanksgiving holiday for the U.S. stock market. Now that it's the day after the Thanksgiving holiday, we're wondering if the S&P 500's 'thanksgiving leftovers', the ten stocks that have lost the most value during the year-to-date in 2025, might provide an opportunity to deliver better returns than the S&P 500 itself in the next year.

Which would be cool if it works, but we don't know that it does. Here's how Investopedia describes how the Dogs of the Dow investing strategy works:

The general concept is to allocate money to the 10 highest dividend-yielding, blue-chip stocks among the 30 components of the DJIA. This strategy requires rebalancing at the beginning of each calendar year.

That presents a problem for the 10 worst-performing stocks of the S&P 500, because none of these stocks would be considered blue chip companies and because seven of the ten pay no dividends. Here's the list with stock prices and Year-To-Date (YTD) stock price performance as of 28 November 2025 to make them genuine Thanksgiving leftovers!

• Fiserv (NASDAQ: FISV) - $61.47 (YTD: -70.1%)
• Trade Desk (NASDAQ: TTD) - $39.56 (YTD: -66.3%)
• Deckers Outdoor (NYSE: DECK) - $88.03 (YTD: -56.7%)
• Gartner (NYSE: IT) - $232.74 (YTD: -52.0%)
• Lululemon Athletica (NASDAQ: LULU) - $184.18 (YTD: -51.8%)
• Molina Healthcare (NYSE: MOH) - $148.26 (YTD: -49.1%)
• Alexandria Real Estate Equities (NYSE: ARE) - $53.67 (YTD: -45.0%)
• Chipotle Mexican Grill (NYSE: CMG) - $34.52 (YTD: -42.8%)
• Factset Research Systems (NYSE: FDS) - $277.27 (YTD: -42.3%)
• Dow Inc. (NYSE: DOW) - $23.85 (YTD: -40.6%)

The three firms that pay dividends on this list are Alexandria Real Estate Equities (a real estate investment trust that focuses on pharmaceutical and biotech facilities), Factset Research Systems (a provider of financial data and analysis for financial professionals), and Dow Inc. (a manufacturer of chemicals, with no relation to Dow Jones Industrial Average that puts the "Dow" into the "Dogs of the Dow" investing strategy).

For our Thanksgiving leftovers from the S&P 500, we're going to look two hypothetical investing scenarios. For the first, we'll invest in only the "high-yielding" members of the list of Thanksgiving leftover stocks and compare how that investment performs against the seven other stocks in the list and the S&P 500 as a whole.

For the second hypothetical scenario, we'll invest in the entire list of stocks with the size of the investments weighted by their share of the ten stocks' market capitalizations as of 28 November 2025, and see how that compares against the S&P 500.

We have no idea how any of that is going to turn out. Will reversion to the mean happen for these worst performers giving each a market-beating rate of return? Or will the troubles at the companies that caused their stock prices to plummet so much in the first place keep them falling through the floor? Will the dividend-paying firms or non-dividend paying firms deliver a better performance? Or will the S&P 500 reign supreme over all of the above?

We're excited to find out! We'll nail down the methodology and update the status of how the Thankgiving Leftover stocks are doing about once a month, with the first update coming sometime in January 2026.

Image credit: Turkey sandwich photo by Matthew Moloney on Unsplash.

Imagine, for a moment, that you're an investor who has been doing their homework in choosing the next stock in which you'll invest. You've narrowed your options down to two stocks, where you will one invest in one. One of the two stocks is a growth stock, which is to say that your returns will be totally determined by how its price changes over time. The other stock you're thinking about buying is a value stock, whose stock price could also grow, but which also will pay you dividends.

Which stock will you choose?

To answer that question, you will need to make some judgments about how each stock is valued. That can be as easy as calculating its Price-to-Earnings Ratio (P/E), but a word of warning. What you care about is the future, because that's where your returns will be. How can you factor in how much the companies behind each stock will grow in the future? And in the case of the value stock that also will pay you a dividend, how can you factor those future returns into your valuation assessment?

Quantamental Trader reviewed how legendary trader Peter Lynch did that when selecting the stocks in which he invested:

The Foundation: From P/E to PEG

Traditionally, the Price-to-Earnings (P/E) ratio has been a fundamental metric for valuing stocks. It relates the current stock price to its earnings per share (EPS). However, the P/E ratio alone often lacks context because it ignores the company’s expected growth. For example, a high P/E might be justified for a rapidly growing firm, while a low P/E might indicate undervaluation or fundamental problems.

The PEG ratio addresses this by dividing the P/E ratio by the company’s projected EPS growth rate (G):

PEG = Price-to-Earnings Ratio / EPS Growth Rate

A PEG ratio around 1 is generally considered fair value, less than 1 implies undervaluation, and above 1 overvaluation—though these are rules of thumb.

Peter Lynch recognized this metric’s usefulness but also noted its limitations.

The Innovation: Why PEGY?

The PEG ratio, while helpful, ignores dividends. Mature companies often grow earnings slowly but pay dividends consistently, returning value to shareholders. The PEG ratio tends to unfairly penalize these slower-growers because their growth rate is lower, making PEG higher even though their total return could be attractive when dividends are included.

To correct this, Lynch introduced the PEGY ratio, which incorporates dividend yield (DY) alongside expected earnings growth:

PEG = Price-to-Earnings Ratio / (EPS Growth Rate + Dividend Yield)

By summing the earnings growth rate and dividend yield, PEGY reflects the total expected return—growth plus income—and better accounts for companies at different stages: fast-growing firms with little dividend, and mature firms with steady dividends.

We've built the following tool to do the PEGY ratio math, but first, here's some data from two stocks we researched on Seeking Alpha. Both stocks are beneficiaries of the AI boom of recent years. One is a growth stock in the technology sector that pays a very small dividend, the other is a value stock in the energy sector that pays a substantial dividend. Here are their respective valuation metrics, which we sampled after the close of trading on Friday, 15 August 2025:

If you use a site like Seeking Alpha to look up this data, after searching for a specific company, you'll find the P/E Ratio (TTM) under the stock's "Valuation" section, the EPS Diluted Growth (YoY) under the "Growth" section, and the Dividend Yield (TTM) under the "Dividends" + "Dividend Yield (TTM)" section. This data is backwards-looking, which has the advantage of being relatively fixed and which can be used with the assumption that the near future will be similar to the recent past. Alternatively, you could substitute the FWD version of this data, provided you recognize expectations for the future are subject to change with little notice....

Here's the tool. If you're accessing this article on a site that republishes our RSS news feed, please click through to our site to access a working version of the tool.

The default data in the tool is for the growth stock, which finds it has a PEG of 2.45 and a PEGY of 2.35. Substituting the data for the value stock in the tool, we find it has a PEG of 1.93 and a PEGY of 1.39. Quantamental Trader provides the following guidance for how to interpret these results in comparing the two stocks:

Interpreting PEGY

• PEGY < 1: The stock may be undervalued relative to its combined growth and income potential.
• PEGY ≈ 1: The stock is fairly valued.
• PEGY > 1: The stock might be overvalued.

According to this interpretation, both stocks would be considered to be overvalued. The value stock however is closer to being fairly valued according to the PEGY measure.

That's not to say the growth stock won't provide the kind of return you might be hoping for, but it is important to recognize there is a greater risk associated with investing in it. The PEGY valuation tool gives you the means to quantify what that relative risk looks like - just plug in the numbers that matter for the stock you're evaluating.

Image credit: Microsoft Copilot Designer. Prompt: "Picture of an investor doing math to choose between a growth stock and a value stock". Just ignore the math and whatever the investor is doing with their lip and finger to balance the gravity-defying pencil as depicted.

The passage of President Trump's "One Big Beautiful Bill" into law wasn't pretty to watch, but for Americans who have been or will be born in the years from 2025 through 2028, it offered something very new. The law sets up a pilot program for children born during this period that gives them a new way to save, plus a $1,000 credit to get them started.

Called "Trump Accounts", the new investment builds on legislation proposed by Senator Ted Cruz earlier in 2025, which was rolled into the "big beautiful bill". Here's NerdWallet's excellent summary of the basics for the new accounts:

Who qualifies?

Not every kid can get a Trump Account. To be eligible for the $1,000 credit under the pilot program, children must:

• Be born between Jan. 1, 2025, and Dec. 31, 2028.
• Be a U.S. citizen.
• Have a Social Security number.

How do Trump Accounts work?

Getting started

Under the pilot program, the Treasury will set up accounts for qualifying kids if their parents haven’t already done so. Parents aren’t required to make an election.

How do contributions and withdrawals work?

Trump Accounts come with some restrictions. Contributions made before the calendar year in which the beneficiary turns 18 are limited to $5,000 per year. Employers can contribute up to $2,500 to accounts, which won’t count as income for the parents or children.

Trump Account distributions aren’t allowed before the first day of the calendar year the child turns 18.

Contributions made after the child’s 18th year generally follow traditional IRA rules. The IRA contribution limit in 2025 is $7,000 for those under age 50. The money invested grows tax-deferred, and withdrawals are taxed as ordinary income.

There’s a 10% penalty for withdrawing money from an IRA before age 59-½, unless there’s a qualifying exception, such as homebuying, or paying for higher education expenses.

What about taxes?

Contributions made to Trump Accounts before the child’s 18th birth year must be made with after-tax dollars, which means no tax deduction for parents or employers, said Jacob Martin, a certified financial planner in Columbus, Ohio, in an email interview.

While the new Trump accounts aren't themselves necessarily better than existing types of investment accounts, they are aimed to benefit those Americans who stand to gain the most from the power of compounding over time:

The "proposal reflects a growing consensus: investing early in every child’s future is a smart and necessary step," said Marisa Calderon, president and chief executive of Prosperity Now, a national nonprofit organization focused on expanding economic opportunity for low-income families and communities in the United States....

"Research shows that lasting change comes from scale," Calderon said. "Deposits must grow over time and be available when they matter most, such as paying for college, starting a business, or buying a first home."

After 25 years, $1,000 invested in the S&P 500 would grow to approximately $10,835, for example. The average stock market return is about 10% per year for nearly the last century, as measured by the S&P 500 index.

We decided to put that last statement to the test. We have the tools to estimate how much any hypothetical investment in the S&P 500 in any month would be worth at the end of a given period of investing.

We put those tools to work to produce the following chart to show how much $1,000 invested at the average level of the S&P 500 was in any month from January 1955 onward, with the value of the investment shown as of May 2025 when Cruz' introduced his bill. Because the value of the investment grows by more than one order of magnitude over this 70+ year period, we're presenting the following chart showing that growth in logarithmic scale. If you prefer to see the data on a linear scale, we have you covered - just follow this link.

Some quick observations:

• Reinvesting dividends unlocks the power of compounding. In the 20 years from May 2005 to May 2025, an initial investment of $1,000 in the S&P 500 would grow to about $4,932 without dividend reinvestment. With dividend reinvestment, that value of that $1,000 grows to about $7,672.
• The longer the investment is held, the better it gets. At the very long investment horizon of 70 years, $1,000 invested in May 1955 would grow to about $154,546 without reinvesting dividends, but with dividend reinvestment, that $1,000 would have grown to almost $1,231,743 in May 2025.
• The peaks on the chart come from the initial investment being made when the S&P 500 had experienced a crash. By the same token, the troughs in the value of how much a $1,000 investment has grown comes from having been invested when the index itself had either peaked before crashing (such as in 2007) or was experiencing inflating bubble conditions (such as from April 1997 through August 2000).
• Investing just $1,000 once is nice, but making regular investments monthly over a long period of time can help smooth out the investment gains over time. Even if the size of those regular investments is much smaller than $1,000, the benefit of dollar-cost averaging can reduce the impact of the S&P 500's volatility.

There are several tools that use historic data where you can see how the value of money invested in the S&P 500 has changed over time. Here's a sampling:

• Investing Through Time (Political Calculations)
• Stock market returns since 1957 (OfficialData.org)
• S&P 500 Historical Return Calculator [With Dividends] (Of Dollars and Data)
• S&P 500 Historical Return Calculator (Don't Quit Your Day Job)

Each of these tools will deliver similar, but not necessarily the same results. These changes are often attributable to minor things like how a given month's estimated dividends are rounded, which can lead to notable differences when long periods are considered given the compounding math.

We're fans of both Nick Maggiulli's work at Of Dollars and Data and also PK's work at Don't Quit Your Day Job. We recommend exploring their sites and posts to where they've incorporated tools to explore investing and other topics!

Image credit: Photo of a little girl sitting on a couch holding money by Bermix Studio on Unsplash.

You never saw the market crash coming. When it came, it lasted longer than you would ever have expected. The damage it did seriously dented your retirement savings at the worst possible time for you. Now, your ability to live through your retirement years the way you planned is in jeopardy. What can you do?

Working out how to deal with a worst case scenario like this is among the least fun aspects of financial planning because it casts a gloomy shadow over all that you might have hoped you could do in retirement. Yet if you don't and the worst case scenario for you happens, you'll find out quickly how much more gloomy the experience can be. Thinking about how you might recover from that kind of hit while planning your retirement will at least give you a good sense of what you can do if you need to face that situation. There's comfort in knowing what things you can do.

Previously, we considered a scenario in which the worst case happened, but the two hypothetical investors experiencing it at different points of their retirement years never adapted their retirement spending plans to recover from it.

But what if they did? The analysts at Schwab's Center for Financial Research considered how two different hypothetical investors who started off with the same retirement plan might respond to the worst case scenario of a prolonged market crash at the beginning of their retirement years by changing the rate at which they withdrew money from their retirement accounts while the market recovered. One would withdraw just 2% of their retirement savings per year, while the other would withdraw 4% [1]. The following chart shows the results of this exercise:

Here's what they found:

A rebounding market should help them quickly make up lost ground, right? Unfortunately, not always—those continuing withdrawals can create a strong headwind, with more shares sold to support spending in a down market than would be the case when values are appreciating. But by dialing back his annual withdrawals to 2%, Investor 1 will be back where he started after roughly 11.5 consecutive years of 6% annual gains. With a 4% withdrawal rate, Investor 2 would have to have 28 straight years of 6% gains to fully recover.

Somewhat lost in this discussion is the bigger question of what are each investor's retirement savings for. Is it to preserve and grow the total value of their accumulated retirement savings throughout their entire retirement so that it can be passed on to their heirs? Or is it to provide reasonably sufficient funds to support their living expenses during retirement?

For example, let's say you went from having a million dollars in retirement savings when you started your retirement and dropped to around $650,000 after two years of a market crash. Withdrawing 2% annually could get your retirement account to fully recover after 11.5 years, but would mean pulling just $13,000 to support your retirement in that first year of recovery and similar amounts in future years. You could double that withdrawal rate to 4% and you can have $26,000 in that year, but that would mean an extra 16.5 years before your retirement account might reach $1 million again.

Which outcome matters more for you?

Previously on Political Calculations

• When Is the Worst Time for Your Retirement Savings to Take a Hit?
• What Can You Do If Your Retirement Savings Take a Big Hit?
• Will Your S&P 500 Investment Last In Retirement?
• Cashing Out of the S&P 500
• Can You Afford to Retire?
• How Much Do You Need to Save for Retirement?

Notes

[1] Here is Schwab's hypothetical investing scenario for the two investors recovering from a bit hit to their retirement savings:

The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product. Dividends and interest are assumed to have been reinvested, and the example does not reflect the effects of taxes or fees. Both portfolios start with $1,000,000. Both portfolios experience 15% declines in years one and two, while both hypothetical investors also withdraw $50,000 per year. Starting in year three, both portfolios grow 6% per year. Investor 1 withdraws 2% per year. Investor 2 withdraws 4% per year.

Image credit: Recovery Chalkboard by Nick Youngson. Creative Commons CC BY-SA 3.0 at Picpedia.org.