New tax-advantaged "Trump Accounts" for children launch July 4

The Treasury Department announced that "Trump Accounts" will become available to U.S. children on July 4. Marketed as a retirement-oriented alternative to education-savings plans, the accounts operate similarly to individual retirement accounts, allowing contributions from family members, employers and qualifying charities, with earnings growing tax-deferred.

Children age 18 or younger who are U.S. citizens with a work-authorized Social Security number can have an account opened by a legal guardian, parent, adult sibling or grandparent. The enrollment deadline is the year before the child turns 18.

A one-time $1,000 seed deposit from the Treasury will be made to accounts opened for babies born between 2025 and 2028. For children born between 2016 and 2024, a $250 contribution is offered in ZIP codes where the median income does not exceed $150,000, funded by a pledge from tech entrepreneur Michael Dell and his wife Susan. The Dell Foundation estimates that roughly 754,200 children in New York City qualify for the $250 grant, while about 186,900 qualify for the Treasury’s $1,000 deposit.

Contributions can total up to $5,000 per year per child in after-tax dollars, with an employer match of up to $2,500 that counts toward the limit. Charitable and governmental gifts are not subject to the $5,000 cap. The Treasury advises families to use the official Trump Accounts app or the website TrumpAccounts.gov for account access and to ignore unsolicited calls or texts.

Projections from the Treasury suggest that an account receiving only the $1,000 seed could reach $6,000 by age 18, while adding the maximum annual contributions could grow to $271,000 by that age, assuming historical S&P 500 returns. Certified financial planner Douglas Boneparth cautioned that achieving such outcomes would require consistent maximum contributions and strong market performance.

Withdrawals are generally prohibited until the beneficiary turns 18, after which standard IRA rules apply, including taxes and a 10% penalty for early distributions unless an exception such as education expenses or first-home purchase applies.

"The returns on capital today are radically greater than the returns on labor, which means we have a growing wealth gap," said Altimeter Capital CEO Brad Gerstner, who helped develop the accounts.

Critics, including the Urban Institute, note that participation may be lower among low-income families and that contribution disparities could widen existing wealth gaps. The Treasury reported that more than 6 million children have already been enrolled.

Experts suggest families also consider existing options such as 529 college savings plans, custodial UGMA/UTMA accounts or Roth IRAs, which may better suit individual financial goals.