'Trump accounts' claim kids could become millionaires — but experts have major concerns
The One Big Beautiful Bill introduced the Trump Accounts, touted as a long-term savings account for children under 18 with a current Social Security number. The Trump administration framed it as an early wealth-building tool for children, claiming it could make kids millionaires by their late 20s. While the members of the administration have thrown varying projections of the possible income, many financial advisors and policy experts have weighed in to share estimates that depend on the contributions made by parents to these accounts.
As part of the administration's affordability push, the U.S. Treasury and the White House launched the program, Section 530A accounts or Trump accounts, to create a launchpad fund for children, which will be made available to them when they turn 18. Under the Working Families Tax Cuts, U.S. citizens born between January 1, 2025, and December 31, 2028, will receive a $1,000 donation from the federal government under an experimental scheme, as per the IRS. Families and loved ones can further contribute up to $5,000 to such accounts, and charitable organizations and businesses with which the parents are employed can add more beyond the limit. The funds are to be invested by the government, and they are projected to return over 10%, going by the historical average return on the S&P 500, as per CNBC.
“As parents, if we make maximum contributions to our child’s Trump account, the projected value will be nearly $1.1 million by the time they are 28 years old,” White House Press Secretary Karoline Leavitt said at the Trump Accounts Summit in Washington, D.C., last month. In the same event, President Trump claimed “with every modest contribution, Trump accounts should reach at least $50,000 in value” by age 18 and "with slightly greater contributions, the typical account will grow to $100,000, $200,000 and can even grow up to past $300,000 per child." Further, the website, TrumpAccounts.gov, projects that accounts could grow to $6,000 by age 18 with $0 contributions, and with $250/per year, the amount could grow to $51,000 by the time a child turns 27.
However, experts believe the numbers to be rather inflated. According to a report from Alan Viard, senior fellow emeritus at the conservative think tank American Enterprise Institute, the estimates come without adjusting for inflation or taxes. Another expert, Gloria Garcia Cisneros, a CFP and wealth manager at LourdMurray, told CNBC that the returns are estimated on the assumption that the accounts will yield 9% annual returns, the "long-term average growth rate" of the stock market, but she noted that “year-to-year, the stock market is up and down quite a bit." According to a January report from Morningstar, market analysts project stock market returns to be lower over the next decade, with estimates from six major firms hovering between 3.1% and 6.7% annually. Furthermore, while the official website of the program states the funds will be invested in “broad U.S. equity index funds,” the exact investment options are unclear, making it uncertain for investors to know how much they will pay in custodian fees or fund expense ratios.
Meanwhile, White House spokesman Kush Desai has urged economists to carefully consider their projections. “Economists who couldn’t see one year into the future need to have the humility to admit that they probably can’t predict 28-plus years of compound growth that a generation of American children will enjoy thanks to Trump Accounts,” Desai wrote in an email to CNBC.
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