The US government is set to roll out “Trump Accounts”, a new tax-advantaged investment programme aimed at boosting long-term savings for children, with more than 500,000 families already signed up ahead of its launch this summer, according to a Reuters report.
Under the scheme, the US Treasury will deposit $1,000 as seed money into investment accounts for children born between 2025 and 2028 who have a valid Social Security number. The programme is scheduled to begin in July, with the funds invested in low-cost index funds that grow on a tax-deferred basis. Income tax will be payable when money is withdrawn.
Parents, guardians, employers or other entities will be able to add contributions to a child’s account, subject to an annual cap of $5,000. Of this, employer contributions are expected to be limited to $2,500 a year. Once the child turns 18, control of the account will transfer to them.
To open an account, families must first file IRS Form 4547, which can be submitted at any time. Later in the year, accounts can also be set up online through a dedicated government portal.
The initiative has also attracted significant private backing. Entrepreneur Michael Dell and his wife Susan announced in December that they would deposit $250 into individual accounts for 25 million American children, representing a philanthropic commitment of $6.25 billion. According to a spokesperson, the funds will go to children living in ZIP codes where the median family income is $150,000 or less.
Several large employers have also pledged support. JPMorgan Chase said it will match the government’s one-time $1,000 contribution for eligible US employees’ children. Bank of America plans a similar $1,000 match and will allow eligible employees to make pre-tax contributions through payroll deductions, according to an internal memo seen by Reuters. President Donald Trump has said dozens of major employers — including Uber, Charles Schwab and Charter Communications — have agreed to include Trump Account contributions in their employee benefit packages.
Financial advisers, however, caution that while the seed money adds appeal, it does not change the fundamentals of long-term wealth building. “A one-time or modest ongoing contribution can help with engagement and early momentum, but long-term outcomes will still be driven by consistency, contribution limits, investment choices and market returns,” said Doug Boneparth, president of Bone Fide Wealth in New York.
Experts say Trump Accounts function much like a custodial retirement account. “Trump Accounts are essentially a custodial IRA overseen by a parent or legal guardian,” said Alex Caswell, a certified financial planner at Wealth Script Advisors in San Francisco, Reuters quoted. When the child turns 18, the account converts into a traditional IRA. However, the tax treatment can be complex because the account may include both tax-free distributions and taxable investments. “It gets messy,” Caswell noted.
Withdrawals will follow IRA-style rules, including penalties for early or non-qualified use, said John Iselin, associate director of economic research at the Budget Lab at Yale, adding that the assistance offered is “broad and shallow rather than targeted and large”.
Illustrations shared by financial planners show the potential impact over time. Leaving the $1,000 seed money untouched for 28 years at an assumed annual return of 10% would grow it to about $16,000, according to Andrew Herzog of the Watchman Group in Texas. Investing the seed money along with monthly contributions of $100 until age 18, then letting it grow for another decade, could result in a balance of around $180,000. Maxing out annual contributions at $5,000 until age 18 and allowing the funds to grow further could push the portfolio close to $700,000 by age 28.
Beyond returns, advisers say the programme could play a role in improving financial literacy. “There are some teachable moments when kids have investments in their name as they get older,” said Jackie Cummings Koski, a financial educator. Others stress that the real impact will depend on whether families develop regular saving habits.
Several details remain unresolved, including how Trump Accounts will be treated when families apply for federal student aid, who will manage the accounts, and how compliance and employer funding will be handled. “We’re just sitting put, waiting to get more guidance,” Caswell said.
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