By: Mercy Okoronkwo
Trump accounts are saving accounts meant to promote saving within families, but how do they achieve this? Is the future actually in Trump Accounts?
On December 2, 2025, Michael and Susan Dell donated $6 billion to fund Trump accounts. Trump accounts are savings accounts made by parents or guardians for children under the age of 18. The savings account is similar to a college savings account, the 529. However, when the beneficiary turns 18, the account will turn into an IRA, an individual retirement account. Trump accounts incentivize families that have newborns from January 2, 2025 to December 31, 2028 to create accounts for their child and claim $1,000 of seed money. Dell’s family donation will give $250 to the first 25 million families under 11 who live in ZIP codes where the median family income is $150,000 or less, and will not get the $1,000 seed money. Trump accounts are intended to help families of all backgrounds plan for their child’s future, but they will have little impact on alleviating the wealth disparity faced by low-income families.
Trump accounts are not distinctly different from common savings accounts, like a 529 or an IRA, but they are mainly attractive because of their $1,000 seed benefit. Compared to a 529, the Trump account has major restrictions on how much you can contribute to the account in a year. For the Trump account, contributions per year are capped at $5,000, while the 529 does not have a contribution limit. In addition, the Trump accounts are tax-deferred, meaning that withdrawals are taxed like ordinary income. In a 529, withdrawals are tax-free for educational purposes. Before the child is 18, the Trump account money is locked up, and there are no exceptions. After 18, when the trump account turns into a “traditional IRA,” they can use the money for whatever they want, but if they are younger than 59 ½, a standard retirement plan half-birthday rule, there will be a 10% penalty. To put it in simple words, if the Trump account money is accessed after the child is 18 but before they are 59 ½, there is a 10% penalty in addition to an ordinary income tax. Ultimately, there is not much the Trump accounts have to offer besides the seed money that some parents might want to help kickstart their child’s savings.
Despite the Trump account’s focus on family, it does not provide many advantages to low-income families. If a child’s family were to live paycheck to paycheck – barely able to deposit beyond the initial $1,000 – their Trump account may reach a hypothetical total of $5,389 by the time that child reached the age of 18. That is a good amount of money, but nothing crazy. If another family were able to put the maximum of $5,000 every year, the well-off child would have $303,757 by the age of 18. Faced with two contrasting financial situations, Trump accounts only magnify inequalities rather than solving them. Unfortunately, the disparities go beyond even this. Trump accounts are built like tax-advantaged retirement plans, meaning the more you put in, the larger your tax break. So families with higher incomes have extra money to put into the accounts, and a larger amount saved, meaning the accounts will have larger tax subsidies. Trump accounts do not give children a head start, but instead amplify the wealth disparities of American families.
Interestingly, Trump accounts seem to echo another policy that was conceived years ago: the Baby Bond. The Baby Bond was also created to close the racial wealth gap, but had a more effective plan of reaching financial equality. In a 2010 co-authored paper, New York City mayor-elect Zohran Mamdani’s economic advisor Darrick Hamilton and Professor William Darity Jr. of Duke University birthed the idea of “Baby Bonds” that will generate $50,000 or 60,000 for children of families in the lowest wealth quartile and will be accessible when the child reaches the age of 18. Baby Bonds are given to every child at birth, and the finances of the account are managed by the government. The child is allowed access to the account when they reach the age of 18. Parents are not pressured into giving money to the accounts, but the government is given control. Baby Bonds are predicted to end the cycle of poverty and shrink the wealth gap from 91% to 25%. Baby Bonds legislation has been passed in the states of Connecticut, California, and Washington DC and has also been proposed to many other states. Although Connecticut is the only state that has passed, funded, and enrolled its first beneficiaries in July 2023 under its legislation. Unlike Trump accounts, Baby Bonds give every child a real chance, regardless of their family’s financial background.
Trump accounts are still fairly new, and there are many things that will be sorted out in the near future. From what is told to the public, Trump accounts are intended to have families in mind, and to work for the future of America: children. In actuality, it ignores that the majority of Americans are unable to properly save for their children’s future when they are currently dealing with financial issues.
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