Millions of American families have signed up for the newly launched Trump Accounts, but some parents are still waiting for the $1,000 in federal seed money promised for eligible newborns while financial advisers caution that the accounts may not be the best place for families to prioritize their own savings.
What’s Going on With Trump Accounts?
President Donald Trump pushed the program during a rally in Georgia, describing the accounts as a way to give children a financial stake in the American dream.
More than 7 million Trump Accounts, also known as 530A accounts, have reportedly been opened since the program launched July 4.
The tax-deferred investment accounts are available to children under 18 with Social Security numbers. Children born between Jan. 1, 2025, and Dec. 31, 2028, are eligible for a one-time $1,000 contribution from the U.S. Treasury, The New York Times reported.
Once established, parents, relatives, employers, and others can contribute to the accounts, with individual contributions generally capped at $5,000 annually. The money is invested in low-cost stock market index funds and largely remains locked up until the child turns 18.
But the highly promoted $1,000 isn’t reaching every eligible account immediately.
Masaki and Kristina McLellan of Bergen County, New Jersey, opened an account for their daughter Maya, who was born in March, ABC News reported. After initially having the application rejected, Masaki McLellan contacted the program’s hotline and eventually had the account activated.
He was initially told the government’s $1,000 would arrive within 10 days. He later learned it could take as long as four weeks. Other parents have also experienced a delay.
The Treasury Department maintains that such delays are unusual and says most eligible families receive the $1,000 within one or two days.
Trump Accounts enter a crowded field of savings options already available to parents, including 529 college savings plans, custodial brokerage accounts and, under certain circumstances, Roth IRAs.
That means opening a Trump Account doesn’t necessarily mean parents should make it their primary savings vehicle.
The McLellans, for example, already established a 529 college savings plan and custodial brokerage account for Maya. Her Trump Account will become her third investment account.
A major drawback of Trump Accounts is their lack of flexibility. Money generally remains locked away throughout childhood. At 18, the account transitions into a traditional IRA controlled by the child. Funds can continue growing for retirement or potentially be withdrawn under rules allowing certain uses, including education, and purchasing a first home.
A 529, by comparison, is specifically designed for education.
Contributions are made with after-tax money and grow tax-deferred, while qualified withdrawals are tax-free. Eligible expenses have expanded beyond traditional college costs to include certain K-12 private-school expenses, apprenticeships, and student loan payments.
Under current rules, as much as $35,000 in unused 529 funds can also potentially be rolled into a Roth IRA over time, subject to applicable requirements.
Under Trump Accounts, individual after-tax contributions can generally be withdrawn without being taxed again, while investment earnings and deposits from the government, employers, and other organizations may be taxable when distributed.
In addition to the federal government’s $1,000 for qualifying newborns, billionaire Michael Dell and his wife, Susan, have pledged $250 contributions for millions of eligible children born between 2016 and 2024 who live in ZIP codes where median household income falls below $150,000. Goldman Sachs, JPMorgan Chase and Morgan Stanley are among companies that have pledged contributions.
According to estimates cited by The New York Times, Vanguard calculated that contributing $5,000 annually from birth could potentially produce approximately $160,000 by age 18, with a 6% annual return and relatively low investment expenses.
Contributing $1,000 annually could produce around $32,000 under the same conditions.
Unlike many state and local “baby bond” programs designed specifically to address wealth inequality by targeting lower-income children, Trump Accounts are available regardless of family income. Critics argue that wealthier households will be better positioned to maximize annual contributions, potentially giving their children significantly larger balances.
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