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Trump Accounts for kids are designed to give children a government-funded starting balance that can grow over time through investment returns and additional contributions. For example, a $1,000 deposit earning roughly the average annual return of the S&P 500 could reach about $5,560 by age 18 or nearly $490,370 by age 65 without additional contributions. Outcomes vary depending on your time horizon, contributions and inflation, which can shape how much a child could ultimately accumulate.
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What Is a Trump Account?
A Trump Account is a government-seeded investment account for children, created under the One Big Beautiful Bill Act to provide a starting balance at birth that can grow over time. Each eligible child receives an initial $1,000 contribution from the federal government, with the account held in a custodial structure until the child reaches adulthood.
Families can make additional contributions, subject to annual limits, and the funds are typically invested in diversified assets designed for long-term growth. The account functions as a long-term savings vehicle, similar in structure to other custodial investment accounts.
The overall design combines an early government-funded contribution with private savings, giving children a financial base that can expand over decades.
Contribution Limits
Each Trump Account is funded with a one-time $1,000 deposit from the federal government at birth for children who qualify based on being born between January 1, 2025 and December 31, 2028, as outlined in OBBBA. Families can contribute up to $5,000 per year per child using after-tax dollars, and a parent’s employer may contribute up to $2,500 annually. Funds are invested in a limited menu of diversified options designed for long-term growth.
Eligible Investments
Trump Accounts are designed to keep investment options simple, low-cost and broadly diversified. During the growth period, funds must be invested in mutual funds or exchange-traded funds (ETFs) that track a broad U.S. stock market index, such as the S&P 500 or a similar benchmark of primarily U.S. companies. These funds cannot use leverage and must meet strict cost limits, with expense ratios generally capped at 0.1%.
More complex or speculative investments, including individual stocks, sector-specific funds or options, are not allowed. The rules also prevent holding cash or money market funds for extended periods, reinforcing a long-term, growth-oriented approach.
Distribution Rules
Trump Accounts follow a two-phase structure that changes once the child reaches adulthood. During the “growth period,” which lasts until the end of the year before the child turns 18, withdrawals are generally not allowed. This restriction is designed to keep funds invested and compounding throughout childhood.
Starting January 1 of the year the child turns 18, the account transitions into a traditional IRA framework. At that point, funds can be withdrawn, but distributions are typically taxed as ordinary income. Withdrawals taken before age 59 ½ may also be subject to a 10% early withdrawal penalty, with standard IRA exceptions such as qualified education expenses or a first-time home purchase.
Running the Numbers: How a Trump Account Can Grow
The value of a Trump Account depends on how much is contributed, how long the money stays invested and the rate of return earned over time. The examples below show how these factors interact under two return assumptions.
These examples assume a one-time $1,000 government contribution at birth, $5,000 in annual contributions through age 18, annual compounding and no withdrawals before the age shown. The “real return” scenarios adjust nominal returns downward by 3% annual inflation.
Growth at 10% Annual Returns
Using returns in line with the long-term average of the S&P 500, early contributions have decades to compound. A $1,000 deposit alone grows to about $5,560 by age 18, but reaches nearly $490,370 by age 65 without additional contributions. The longer time horizon accounts for most of that increase.
Adding $5,000 in annual contributions during the early years produces about $233,556 by adulthood. If that balance remains invested through age 65, it grows to approximately $20.60 million. This shows how consistent contributions combined with long-term compounding can significantly expand the account’s value.
| Scenario | Nominal Annual Return | Account Value at Age 18 | Account Value at Age 65 |
|---|---|---|---|
| $1,000 initial contribution only | 10% | $5,560 | $490,370 |
| $1,000 + $5,000 annual contributions (through age 18) | 10% | $233,556 | $20.60 million |
Growth at 5% Annual Returns
At a 5% return, the same contribution pattern produces more moderate outcomes. A $1,000 deposit grows to about $2,406 by age 18 and $23,840 by age 65, illustrating how lower returns compress long-term growth.
With $5,000 contributed annually through age 18, the account reaches roughly $143,069 by adulthood. Left invested through age 65, that balance grows to about $1.42 million. Even at lower returns, time and consistent contributions still drive meaningful growth.
| Scenario | Nominal Annual Return | Account Value at Age 18 | Account Value at Age 65 |
|---|---|---|---|
| $1,000 initial contribution only | 5% | $2,406 | $23,840 |
| $1,000 + $5,000 annual contributions (through age 18) | 5% | $143,069 | $1.42 million |
Across both scenarios, the difference in returns leads to dramatically different outcomes over time. The gap between a 10% and 5% return may not seem large in a single year, but over decades it can mean the difference between hundreds of thousands and millions of dollars. That spread reflects how compounding magnifies even small changes in annual performance.
How Inflation Affects Trump Account Growth
Nominal returns show how an account grows over time, but they don’t reflect changes in purchasing power. Inflation reduces what those future dollars can actually buy, which is why many projections also use inflation-adjusted, or “real,” returns.
When adjusting a 10% return for 3% inflation, the real return falls to about 6.8%. Under that assumption, a $1,000 deposit grows to about $3,268 by age 18 and $71,967 by age 65. With $5,000 in annual contributions through age 18, the account reaches roughly $170,033 by adulthood and about $3.74 million by age 65 in today’s dollars.
Using a more conservative 5% return adjusted to a 1.9% real rate, outcomes are lower. A $1,000 deposit grows to about $1,403 by age 18 and $3,374 by age 65. With annual contributions, the account reaches about $107,522 by age 18 and $260,426 by age 65 in inflation-adjusted terms.
| Scenario | Nominal Annual Return | Real Return | Value at Age 18 | Value at Age 65 |
|---|---|---|---|---|
| $1,000 initial contribution only | 10% | 6.8% | $3,268 | $71,967 |
| $1,000 initial contribution only | 5% | 1.9% | $1,403 | $3,374 |
| $1,000 + $5,000 annual contributions (through age 18) | 10% | 6.8% | $170,033 | $3.74 million |
| $1,000 + $5,000 annual contributions (through age 18) | 5% | 1.9% | $107,522 | $260,426 |
How to Open a Trump Account
Opening a Trump Account involves making an election with the IRS on behalf of an eligible child. A parent, legal guardian or other authorized individual can complete IRS Form 4547, which establishes the account and allows the child to receive the $1,000 government contribution if eligible.
This election can typically be submitted when filing a tax return or through an online portal expected to launch alongside the program. Once the election is processed, the Treasury coordinates with a financial institution to create and activate the account.
To qualify, the child must have a valid Social Security number and be under age 18 in the year the account is opened. After setup, families can begin contributing and selecting from the available investment options as the account enters its growth phase.
Frequently Asked Questions (FAQs)
Can you have both a Trump Account and a 529 plan?
Yes, you can have both a Trump Account and a 529 plan for the same child. These accounts serve different purposes and follow different rules, so they can be used together as part of a broader savings strategy. Using both may allow families to balance flexibility, tax treatment and long-term growth.
Which is better: a Trump Account or a 529 plan?
It depends on how the funds will be used. A 529 plan is designed specifically for education expenses and offers tax advantages when used for qualified costs. A Trump Account offers more flexibility over time, especially after age 18, but may not provide the same tax benefits for education-specific spending. Some families may choose to use both to cover different goals.
What happens if the money isn’t used for education?
Funds in a Trump Account are not limited to education expenses. After age 18, the account is treated similarly to a traditional IRA, so withdrawals can be used for any purpose. However, distributions may be subject to income taxes and potential early withdrawal penalties depending on the timing and use.
Bottom Line
Trump Accounts provide a government-funded starting point that can grow substantially over time, especially with consistent contributions and long investment horizons. As the projections show, outcomes vary widely based on returns and inflation, ranging from modest balances to multimillion-dollar results. Understanding how these variables interact can help families decide how to use these accounts as part of a broader plan for education, savings and long-term financial goals.
Education Planning Tips
- A financial advisor may help you build a strategy to fund your child’s education, from selecting savings vehicles to aligning contributions and investments with your long-term goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Tuition and related expenses have historically risen faster than general inflation. Factoring in these increases when estimating future costs can help you build a more realistic savings target and adjust contributions over time. Revisiting those assumptions periodically can also keep your plan aligned with changing tuition trends.
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