Parents are dreaming big about Trump Accounts. Here's the reality
Susan Tompor, USA TODAY NETWORK
Tue, August 4, 2026 at 12:06 PM GMT+3 14 min read
The Trump Accounts site says "big things start with small steps." But if you're imagining that your child could have hundreds of thousands of dollars — or maybe even millions — one day in a new tax-advantaged Trump Account, well, take a careful look at what it takes to make the big bucks.
Building wealth depends a great deal on how many years the money remains invested after the child turns 18 years old. And much depends on whether family, friends, your employer and others contribute cash along the way.
Much will depend, too, on how well the stock market does over several years and how the money is invested.
Ideally, Trump Accounts should be viewed primarily as a way to start saving as early as possible for retirement, said Spencer Look, associate director of retirement studies at the Morningstar Center for Retirement & Policy Studies in Chicago.
The idea behind federal children's savings accounts – which historically had bipartisan support – is that such accounts can offer many families more room to build wealth for the next generation. Trump Accounts are the first federal child savings accounts in the United States.
The risk, though, is that smaller balances could be more likely to be liquidated early on, based on other research, according to Look. Families with limited means may be more likely to want to use what money is available toward other expenses early in a young adult's life.
At 18 or 19, for example, someone might want to use the money for education, training or other expenses involved with transitioning into adulthood. At 30, someone might want to use the money for a down payment on a house.
Like other financial analysts, Look has concluded that children from higher-income households could be more likely to receive ongoing contributions as children into Trump Accounts and remain invested well into their 50s. As a result, the shot of building wealth is greater for those with more wealth to start.
How much money can you grow in a Trump Account?
Babies born in 2025, 2026, 2027 and 2028 could qualify for $1,000 in one-time seed money from the federal government once their parents or guardians sign up for an account. The children must be U.S. citizens with a valid Social Security number.
It makes opening an account for a newborn very attractive – and rich with dreams of wealth.
One online estimate at TrumpAccounts.gov indicates that the $1,000 might turn into $6,000 in 18 years, even if no more money is saved in the plan.
That estimate is based on no additional contributions from family, friends, employers or others. It reflects historical S&P 500 averages. "Actual results may differ and are not guaranteed," the official online site notes.
Sure, it's debatable on how big those accounts can really get over time.
But $6,000 might be in the ballpark after 18 years if things go well and you made some very minimal contributions over time, based on some numbers I ran through an online calculator.
Or maybe, if things don't go as well, you could see roughly half that amount.
An online calculator for iShares by BlackRock gives an average hypothetical return of nearly $4,918 after 18 years, for example, if you invested $1,000 now and contributed a $1 a month. That figure is based on an average return of 8.61% for the S&P 500 index. It includes the total contributions plus the total return. Return and hypothetical growth assumptions are based on rolling 20-year annualized returns.
The range of possible outcomes for return on investment over 18 years for that scenario on that site is $3,230 to $6,869.
Oh, the numbers can look even more grand at age 55 if the grown child doesn't touch the money at age 18 and after. By age 55, according to the TrumpAccounts.gov site, the $1,000 is estimated to be able to grow to $243,000.
The amount could grow to $13 million, according to the site, at age 55 if the account consistently saw $5,000 in contributions each year.
In case you missed it: Trump Accounts aren't just for newborns. Is your child eligible?
Getting all that money isn't guaranteed, though, and you'd need some strong returns over the next 50-plus years.
Look, of Morningstar, ran some of his own numbers, which triggered much, much lower outcomes on average. He's taking into account the possibility that many people could liquidate those accounts at age 18 or 30 and bring down the overall average significantly. Not all beneficiaries, Look said, are likely to keep their assets invested after they can access their accounts as soon as age 18.
Look's calculations indicated that the average balance at age 55 could be as low as $39,000 for a child who only receives the $1,000 federal seed contribution.
The average balance, he said, might be as high as $5.5 million at age 55 for a child who receives ongoing contributions of $5,000 a year from family and friends until reaching age 18. He said that the contributions of $5,000 a year stop at 18 in all contribution scenarios that he ran in his projection.
After the growth period in the year the child turns 18, Look noted, the grown child can start contributing to the account themselves, subject to the annual contribution limits that apply to Individual Retirement Accounts.
Currently, according to the U.S. Treasury, all contributions to Trump Accounts will be invested in the State Street SPDR Portfolio S&P 500 ETF, a low-cost exchange-traded fund that tracks the performance of the S&P 500 Index. This is the default fund. In the future, parents and guardians will be able to choose to invest in other low-cost options if they wish to change the investment allocation.
How do you open a Trump Account?
Parents and legal guardians can use IRS Form 4547 when they file their taxes to elect to establish an initial Trump Account for the exclusive benefit of a child who is eligible.
Or they can go to TrumpAccounts.gov to sign up and find more information.
There is no cost to open an account.
What about toddlers and teens?
The $1,000 in up-front money from the feds will not apply to older children. Even so, Trump Accounts can be opened on behalf of any child under the age of 18. Again, the child must be a U.S. citizen with a valid Social Security number.
The account must be opened before the calendar year in which the child turns 18.
Morningstar's Look suggests that parents or guardians should check whether the older child is eligible to receive contributions from other sources, like employers or a charitable organization.
If you live in the right ZIP code – and many people do according to the guidelines – families with newborns and young children could see $250 from tech billionaire Michael Dell and his wife, Susan.
The first 25 million American children age 10 and under living in ZIP codes with median incomes below $150,000 will receive an additional $250 into their Trump Accounts.
Where you work could give you another reason to open a Trump Account
Some families really have a good opportunity to stack wealth – and should not overlook other avenues that offer to put more money into your child's account.
More than 50 companies, according to the U.S. Treasury, committed to offering contributions to Trump Accounts for the children of employees.
Many times, though, we are talking about the company promising to match the federal government's contribution for babies born in 2025, 2026, 2027 and 2028.
Dig into the details of the rules and restrictions of any promises made by companies or communities.
JPMorganChase announced in late January that the New York-based financial powerhouse will match the U.S. government's one-time $1,000 contribution to children of eligible U.S. employees. This bonus would apply to children born in 2025 through 2028.
Dell Technologies will provide a $1,000 match, as well, if the child is born in 2025 through 2028 and qualifies for the $1,000 seed money from the federal government. If the child is already 11 years old now, it doesn't apply.
Chipotle Mexican Grill, which has its headquarters in Newport Beach, California, promises to match the $1,000 contributed by the federal government for the newly born, too. The benefit applies to eligible employees across more than 4,100 restaurants in the United States.
"This investment reflects our belief that when we help our people and their families, we strengthen our communities and our company," said Laurie Schalow, Chipotle chief corporate affairs officer, in a statement given to the Detroit Free Press, part of the USA TODAY Network.
She noted that the program aligns with the company's efforts to support "the whole employee – at work, at home, and into the future."
The Trump Accounts site lists several big names offering additional support, including Charter Communications, Dell Technologies, BlackRock, Uber, Comcast and others.
How many have already signed up for Trump Accounts?
More than 6.5 million families have signed up for Trump Accounts since the announcement of the accounts in late January, according to information provided to the Detroit Free Press by a U.S. Treasury spokesperson on July 21.
The Internal Revenue Service indicated in March that it had processed more 4 million requests for Trump Accounts on Form 4547. That amount included more than 1 million children who appeared to qualify for the $1,000 pilot program contribution from the federal government.
What can Trump Accounts be used for?
Many parents might hope to use that money for college education. But it also can be used toward retirement, putting a down payment on a home or other qualifying expenses. You want to pay careful attention to the tax rules, though, before making any moves.
Is a 529 college savings plan better than a Trump Account?
A 529 plan and a Trump Account serve different purposes, Morningstar's Look noted.
"At the risk of stating the obvious," he said, "children who are eligible for the initial federal seed contribution or other third-party contributions to a Trump Account may want to take advantage regardless."
If there aren't outside contributions, though, parents might want to consider others saving options and goals.
"Trump Accounts are positioned well for long-term growth, but the right decision depends on a family's overall goals, tax situation, and expected use of the funds," Look told the Detroit Free Press.
If your main goal is saving for college, some suggest that 529 college savings plans remain in the mix.
As parents save for their children, Look said, it is important to realize that a 529 plan provides a clear tax advantage for qualified education expenses because qualified withdrawals are exempt from federal income taxes and are generally exempt from state taxes.
"If the family's primary goal is to pay for a child's education, then a 529 is probably the more natural choice. It's also noteworthy that up to $35,000 in a 529 plan can be rolled into a Roth IRA," Look said.
Education is a qualified purpose for receiving a distribution from a Trump Account. But experts warn that earnings from a Trump Account would still be taxed as ordinary income.
In case you missed it: Trump Accounts are now live. Here's how they work
How are Trump Accounts taxed?
The Trump Account converts to a traditional IRA as of Jan. 1 in the year that the child will reach 18. A child cannot access the cash. But money can be withdrawn when the beneficiary is an adult at 18.
Once that milestone year is reached, the account is treated much like a traditional IRA for tax purposes.
The earnings portion of withdrawals is generally taxable as ordinary income. according to Tom O'Saben, director of tax content and government relations at the National Association of Tax Professionals.
The tax rate that would be paid would vary based on the beneficiary's income level. Currently, there are seven federal income tax rates ranging from 10% to 37%.
One plus: You would waive an additional 10% tax that might apply to early distributions before age 59½ – if the money is withdrawn to cover first-time home buyer expenses up to $10,000 or used for qualified higher education expenses.
Other cases where the 10% penalty tax is waived include when you reach age 59½ or older, death, total or permanent disability, certain medical-related expenses, and a few other reasons, according to Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting in Riverwoods, Illinois.
Previously taxed contributions are recovered tax-free.
The Trump Account may remain open indefinitely and may later be converted to a Roth IRA under the normal Roth conversion rules.
"Unlike a Roth IRA or a 529 plan, Trump Account contributions are made with after-tax dollars, so just the earnings are ultimately taxed as ordinary income rather than at long-term capital gain rates," O'Saben told the Detroit Free Press.
A younger saver who might not need the money for college could want to convert the account to a Roth IRA and pay the necessary taxes if they're in a lower tax bracket. But much depends on an individual's situation and how much money they have already set aside for college or whether they're fortunate enough to land sizable scholarships.
Luscombe noted for some it might be savvy to convert to a Roth IRA as a young adult.
"Since an 18-year-old would be more likely to be in a lower tax bracket, the conversion tax might be lower than later in life," Luscombe said.
After conversion to the Roth, future earnings are tax-free if Roth IRA rules are met.
Another key point, according to Luscombe: The annual contributions made by the parents or other relatives or friends to the Trump Account would not be subject to tax since those contributions do not receive an up-front tax break and are made after tax.
Will Trump Accounts hurt your ability to get a student loan?
Parents should consider that it's possible that Trump Accounts may reduce eligibility for need-based financial aid, according to Mark Kantrowitz, a student loan expert and author.
We don't know exactly what will happen yet.
As of July 20, Kantrowitz noted, the U.S. Department of Education had not given guidance about how Trump Accounts should be reported on the FAFSA or Free Application for Federal Student Aid.
Some scenarios could play out.
It's possible that the money in the Trump Account could be reported as a student asset, reducing need-based aid eligibility by 20% of the asset value, Kantrowitz said. This reduction would take place each year the college student applies for need-based aid until the Trump Account is liquidated.
Or if Trump Accounts are treated like a retirement asset, they are not reported as an asset on the FAFSA. If money was taken out to pay for college or other expenses, Kantrowitz said, distributions would count as ordinary income to the beneficiary, reducing aid eligibility by as much as half of the distribution amount.
How do families save money in Trump Accounts?
The annual contribution limit into Trump Accounts is $5,000 total per child, with cost-of-living increases after 2027. Qualifying charitable organizations and government entities may make additional contributions and those contributions do not count toward the $5,000 limit.
The one-time contribution of $1,000 from the U.S. Treasury does not count against the annual total $5,000 contribution limit set for family, friends, and others.
But parents might want to consider that there is no minimum required contribution.
Saving even small amounts can help future generations. And if you're already rocking a baby, or expect one on the way, Trump Accounts are worth seriously considering — even if no one is quite certain on how much money your child might end up with at age 18 or 55.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
This article originally appeared on Detroit Free Press: Parents are dreaming big about Trump Accounts. Here's the reality
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