Is a Trump Account Worth It? Projected Growth — and Who Should Skip It
The new tax-advantaged vehicles can give kids a leg up on savings, but they're not the best option for everyone.
Americans will celebrate the 250th birthday of the country this July Fourth, but some families may also be celebrating something else: the launch of the Trump Account, a new, tax-advantaged investment vehicle for children.
Essentially a starter IRA, the account can help build long-term wealth for children, with some kids qualifying for free seed money from the federal government, employers and philanthropists.
"The main idea is to give kids a head start on retirement savings," says Judd Meinhart, director of financial planning at Modera Wealth Management in Winston-Salem, N.C. Unlike IRAs, Trump accounts, which were created under the One Big Beautiful Bill Act of 2025, don't require a child to have earned income.
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Any child younger than 18 who is a U.S. citizen and has a Social Security number is eligible. Parents, grandparents, and other relatives and friends can collectively contribute up to $5,000 a year (the maximum will be indexed to inflation starting in 2028), and babies born between 2025 and 2028 get an additional, one-time deposit of $1,000 from the U.S. government to help kick-start the account. (You can sign up at TrumpAccounts.gov.)
Contributions, which must be invested in low-cost mutual funds or exchange-traded funds that track a U.S. stock index, grow tax-deferred and typically can't be withdrawn until the year the child turns 18. Earnings on money taken out after that point will be taxed as ordinary income, with a 10% penalty on withdrawals made before age 59½, unless they're used for qualified expenses such as education or a first-time home purchase. Intrigued?
Whether the accounts make sense for your family depends on your goal for the money and personal circumstances. Here's how experts suggest you make the call.
Annual Contributions, Birth to Age 18 | Projected Account Value by Age 59½ |
$1,000 | $986,000 |
$5,000 | $4.6 million |
Source: IRA Financial. | Assumes 8% average annual returns, $1,000 government contribution in the first year. |
Open a Trump account if…
You can get free money to fund it. "If you qualify for free seed money, the decision is a no-brainer," says Marianela Collado, a certified financial planner with Tobias Financial Advisors in Plantation, Fla.
There are no income limits to get the $1,000 contribution from Uncle Sam to accounts opened for children born between 2025 and 2028, nor do you need to contribute yourself. Meanwhile, some big companies have pledged to match the federal gift or otherwise contribute to the accounts on their employees' behalf (maximum contribution: $2,500 a year per employee). Among them: Bank of America, Intel and Uber.
A few philanthropists are offering help with funding as well. For example, Michael and Susan Dell will donate $250 to each account opened for children 10 and younger who live in areas where the median household income is below $150,000 (see whether your neighborhood qualifies at ), and similar initiatives have been announced for Connecticut, Indiana and San Francisco. (Find a list of corporate and philanthropic programs here.)
Skip the Trump account if…
Your primary goal is to pay for college. Trump accounts work best as lifelong wealth-building tools, meant to compound for decades. Although you can withdraw money for higher education without penalty, you'll pay taxes on earnings, and it's not yet clear how these assets will impact financial aid.
For education funding, 529 accounts remain a better choice for most parents. Contribution limits are significantly higher and investment earnings and withdrawals are tax-free as long as they're used for qualified education expenses.
Your investment options are broader too, typically including target-date portfolios that shift to a more conservative investment mix to minimize losses as college approaches. "With a 529 account, you're not as limited," Meinhart says.
Consider a Trump account if…
You can afford to set aside money for your child's or grandchild's future after saving for retirement, college and other goals. The extra decades of compounding mean that even small contributions to Trump accounts could create significant wealth.
If you contribute just $1,000 a year from birth to age 18, on top of the $1,000 seed money from the government, for example, the balance could grow to nearly $1 million by the time the child reaches age 59½, assuming an 8% average annual return, according to Adam Bergman, founder of IRA Financial in Sioux Falls, S.D. Increase those contributions to $5,000 a year and the account could be worth more than $4.5 million.
Says Bergman, "It's an unbelievable golden ticket for the families who are able to make contributions consistently."
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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