A New Way to Save for Kids. But is it a Good Deal?
The "One Big Beautiful Bill Act" introduces "Trump Accounts," a new type of savings account for children. It starts with a government deposit and allows families to save more over time. This explainer breaks down the complex rules to help you decide if it's the right choice for your family.
One-time federal deposit for children born 2025-2028.
Maximum annual contribution from family, friends, or employers.
Earnings are taxed when withdrawn, even for qualified expenses.
The Lifecycle of a Trump Account
Open Account
For a child under 18 (Senate) or 8 (House).
Fund It
$1k govt. seed + $5k/yr family contributions.
Watch It Grow
Grows tax-deferred in index funds.
Withdraw & Pay Tax
Use for school/home/biz; earnings are taxed.
Savings Calculator: Trump Account vs. The Alternatives
How does a Trump Account compare to a 529 College Savings Plan or a Roth IRA over the long term? This calculator projects the after-tax value of each account after 18 years. Use the slider to see how different contribution amounts affect the outcome.
Chart assumes a one-time $1,000 government deposit for the Trump Account and a 7% average annual return for all accounts. Tax on Trump Account earnings is assumed at 15% (long-term capital gains rate). 529 and Roth IRA withdrawals for qualified purposes are tax-free.
Scenario: Immediate Cash vs. Locked-Up Savings
The same bill that creates Trump Accounts also temporarily boosts the Child Tax Credit (CTC). For a family with two kids, this means an extra $1,000 in their pocket each year. Which is more valuable? Click the button to see the trade-off.
The Enhanced Child Tax Credit
An immediate, flexible cash benefit for current needs.
Per Year (for 4 years)
The Trump Account Deposit
A one-time deposit, locked away for the future.
One Time (for 2 kids)
The Bottom Line
Over four years, the enhanced CTC provides **$4,000 in cash** to help with rent, food, and childcare today. The Trump Account provides **$2,000 in restricted savings** that can't be touched for 18+ years. For families facing financial pressure, the immediate cash from the CTC is far more valuable.
The Fine Print: What Are the Downsides?
While presented as a pro-family policy, the Trump Account has several critical flaws identified by policy experts. These issues could limit its effectiveness and even cause harm to low-income families.
Trump Accounts have **no income limits**. This means wealthy families, who can easily contribute the $5,000 annual maximum, will see their children's accounts grow much larger than those of low-income families who can't afford to contribute. Instead of closing the wealth gap, analysts from the Urban Institute predict this universal design will actually widen it, acting as another tax shelter for the affluent.
Yes. In a major oversight, the bill **does not exempt Trump Account balances from asset tests** for programs like SNAP (food stamps) and Medicaid. This means that having even a small, inaccessible Trump Account could make a low-income family ineligible for essential food and health benefits, forcing them to choose between future savings and present-day survival.
The tax rules are the biggest catch. Unlike a 529 plan or Roth IRA where qualified withdrawals are tax-free, **earnings from a Trump Account are always taxed**. The House version taxes earnings at capital gains rates, while the Senate version taxes them as ordinary income. This makes it a structurally inferior savings vehicle compared to existing options.
The account has a mandatory termination date. On the beneficiary's **31st birthday, the account is automatically closed**, and any remaining funds are distributed and taxed. This unusual feature works against the goal of long-term wealth building and has been criticized by financial experts as counterintuitive.
Official Sources & Useful Links
For further research, here are official sources and key analytical reports.
