Trump Accounts: Aims, Incentives, and Potential Pitfalls

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Trump Accounts have the potential to build long-term financial security for millions of U.S. children; however, some experts say they may not do much to reduce the wealth gap over time.

The tax-deferred investing accounts, which will launch on July 4, include a one-time $1,000 deposit from the U.S. Department of the Treasury for kids born between 2025 and 2028. Other funds may also be available for qualifying families.

The money in Trump Accounts will be invested in U.S. stock funds, with a goal of kick-starting wealth-building opportunities from a very young age.

"All the money that goes into these accounts will be invested in the best 500 companies in America. They will be direct shareholders," Altimeter Capital CEO Brad Gerstner, who helped spearhead the Trump administration's new savings initiative, said in a May 28 interview on CNBC's "Halftime Report."

"We're going to get all the people who have felt left out and left behind," Gerstner said.

When it comes to wealth-building opportunities, particularly investing in the stock market, many families miss out. The top 10% of Americans hold more than 87% of corporate equities and mutual fund shares, data from the Federal Reserve shows.

So far, families have signed up nearly 6 million children for Trump Accounts, the Treasury Department said in late May. For perspective, that is roughly 40% of all eligible children, according to Madeline Brown, senior policy associate at the Urban Institute, a Washington-based think tank.

"So the question leading into July, when money will actually get deposited, is whether low-income families, low-wealth families and those without means to invest on behalf of their children are in the group who have signed up or the larger group that hasn't," she said.

Grant money is a major incentive

For some, claiming the initial grant is the draw, but other funds may also be available, depending on certain criteria.

Children 10 or under and born before Jan. 1, 2025 — who wouldn't qualify for the $1,000 contribution — could get $250 in their accounts if they live in a ZIP code where the median income is $150,000 or less, courtesy of a $6.25 billion pledge from tech CEO Michael Dell and his wife, Susan. That money is specifically geared toward lower-income families, they said, although only about 3% of ZIP codes have median incomes above $150,000, according to a CNBC analysis of U.S. Census Bureau data.

A growing number of companies have also pledged to match the accounts' $1,000 Treasury deposit for children of employees, and philanthropists in multiple states have committed to additional gifts for certain qualifying families.

Tax filing tie-in leaves some families out

However, because signing up for a Trump Account requires two steps — first filing IRS Form 4547 with a 2025 tax return or via TrumpAccounts.gov, followed by the activation process — overall participation rates, especially among low-income families, may be low, according to a research report by the Urban Institute.

"The decision to link enrollment primarily to tax filing leaves out children who will need it most: A substantial share of low-income households owe no federal income tax, and many of them do not file at all," the report said.

Opt-in 'creates friction'

Experts say automatic enrollment, rather than requiring families to opt in, is the only way to guarantee widespread Trump Account participation across all income levels.

"In any of these programs, you are looking for a frictionless experience, and anything that creates friction will reduce engagement in the program," said Brown.

"If social program administrators in general, and universal savings account administrators in particular, have learned anything in recent decades, it is the importance of automatic enrollment," Nina Olson, executive director and founder of the Center for Taxpayer Rights, wrote in a January letter to the Treasury Department. "A program that requires manual opt-in, no matter how frictionless, will struggle to achieve even majority adoption."

If the Treasury automatically established the accounts for all eligible participants, it could go a long way toward determining how many children — particularly from lower-income families — enrolled and benefited from the grant money, according to an earlier analysis by the Aspen Institute, a nonprofit forum.

Investment gap is likely to persist

Even among those who have already opened a Trump Account on behalf of a child, family contributions will also vary sharply by income, which could compound disparities over time and concentrate the benefits among higher-income households, other experts also say.

"A wealthy family could build a $150,000 nest egg by the time their child turns 30. Meanwhile, a child from a low-income family is likely to be left with about $2,500," Connecticut's state treasurer, Erick Russell, said in a 2025 statement.

TrumpAccounts.gov projections indicate that accounts could grow to $15,000 by the beneficiary's late 20s, assuming there are no further contributions beyond the Treasury's seed money. That's compared with $742,000 if parents also contributed the $5,000 maximum each year. These estimates are based on U.S. stock market returns of over 10%.

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