How ‘Trump Accounts’ can yield $270,000 for your child by age 18: A breakdown of the numbers
During his State of the Union address, President Donald Trump celebrated the launch of his “baby bond” initiative, referred to as “.” In what was the longest speech on record, the president asserted that an 18-year-old could begin with zero and accumulate $100,000. He posed the question, “How much money is that for somebody that started with nothing?”
According to our calculations, the earnings could be higher if parents maximize contributions to these 401K-like accounts. Beginning July 5 of this year, parents with eligible children may deposit up to $5,000 annually into their child’s account. Eligibility requires children to be U.S. citizens under the age of 18 with a Social Security number. Furthermore, to initiate the program, the Treasury will make a one-time contribution of $1,000 to babies born between January 1, 2025, and December 31, 2028.
Breaking down the figures
Last August, the Council of Economic Advisers (CEA)—an Executive Branch agency directed by President Trump’s appointees, Pierre Yared and Kim Ruhl—published an estimating potential savings via Trump accounts. These projections, derived from historical S&P 500 total returns across rolling 18‑year periods starting from 1975, show annualized returns ranging from 5.4% to 18.5%. The CEA report noted that under these conditions, parents contributing the annual maximum of $5,000 could see their child’s account grow to between approximately $187,000 and $730,000. A regarding Trump accounts suggests a potential accumulation of up to $271,000 over 18 years.
However, an independent analysis using the maintained by the U.S. Securities and Exchange Commission indicates these figures are somewhat inflated. According to this source’s calculations, the projected returns for an 18-year account with $5,000 yearly contributions fall between roughly $162,000 and $674,000.
Nevertheless, these represent significant savings, particularly for individuals who, as Trump noted, may start with nothing. For children from lower socioeconomic backgrounds, various philanthropists have committed funds to the accounts, supplementing the Treasury’s initial $1,000. CEO Michael Dell and his wife, Susan, donated $6.25 billion targeted at lower-income families. According to a , this funding will provide an extra $250 per account for the first 25 million children aged 10 and under residing in ZIP codes with median incomes under $150,000. Additionally, several companies—including , , , and —have vowed to match the Treasury’s $1,000 seed investment.
Tax details are still being finalized
In his State of the Union speech, President Donald Trump asserted that the Trump accounts serve as “tax-free investment accounts for every American child.”
However, experts clarify that the accounts are not completely tax-exempt. “It’s not something that is tax free,” stated Dianne C. Mehany, private national tax leader, in an interview with . “And it’s not something that grows tax free like it does for other retirement accounts.”
While the Treasury’s $1,000 seed funding and charitable donations are deposited into the account pre-tax, these contributions are liable for regular income tax upon withdrawal.
Conversely, the investment earnings within the accounts grow tax-deferred, operating similarly to a Roth IRA. “It is essentially a tax deferral mechanism,” Mehany explained. “The Trump Accounts for children is not the same thing as [401ks or TSPs] as it is currently written. You are definitely saving for your children. You are definitely receiving a match from the U.S. government, which is great if you’re in a certain income bracket and your child is born under a certain year.”
Ultimately, the Trump Accounts provide parents with an additional method to prepare their children for the future, whether for education, entrepreneurship, homeownership, or retirement. These accounts ensure that even 18-year-olds who started with nothing have a solid foundation to build upon.