The new “Trump Account” provision in the “One Big Beautiful Bill” is being promoted as a game-changing way to help American families. Every new US citizen born between January 1, 2025, and December 31, 2028, gets a $1,000 deposit from the government. Parents and family members can add up to $5,000 a year. If parents don’t sign up, the account is created automatically.
The stated goals are admirable and appealing: give every child a financial foundation, encourage parents to save early, and help close the wealth gap between families who have resources and those who don’t. Proposals like this have been around for years, with supporters on both sides of the political aisle.
In practice, though, the Trump Account comes with a host of problems that make it a questionable solution for families who truly need help.
1. Little tax benefit or incentives. Unlike a 529 college savings plan, Trump Account contributions are not tax deductible. The money can grow tax-deferred, but withdrawals are not tax-free. Any withdrawals—even for the approved uses of college tuition, a first home, or starting a business—are taxed at capital gains rates. Withdrawals for any other reasons incur a 10% penalty on top of regular income tax. Access is strictly limited; only half of the money can be withdrawn at age 18, and the rest at age 31.
2. The Trump Account is a textbook case of government overengineering. The rules are complicated. The penalties are harsh. Families have to keep track of deadlines, approved uses, and a long list of restrictions. For many middle- and upper-income families, the hassle just isn’t worth it. For families with lower incomes, that $1,000 government deposit is welcome, but it’s just not enough to make a meaningful difference if there’s no ability to keep contributing. And if account balances are small, they could be eaten up by fees over time, leaving little or nothing for the child’s future.
3. The Trump Account doesn’t actually fill a gap in the marketplace. Better tools already exist. The 529 college savings plan offers tax-free growth and tax-free withdrawals for education, and there is a lot more flexibility on what you can use the money for—tuition, books, computers, even some room and board. Or, for children with earned income, a Roth IRA allows contributions to grow completely tax-free, and money can be withdrawn for retirement, education, or even a first-time home purchase without penalties.
Behavioral economists and financial planners have long pointed out that savings plans work best when they are easy to use and when the incentives are clear. Successful programs like 529s and Roth IRAs reward families for saving, and they don’t bury participants in red tape. The Trump Account, by contrast, brings back all the mistakes of old government programs: complex rules, limited flexibility, and penalties that can wipe out any benefit for the people who need it most.
The intention behind the Trump Account—helping children build wealth and closing the opportunity gap—is a worthy one. But the way this product is structured does more to generate political headlines than to solve real financial problems. The signature feature is a one-time $1,000 government deposit and a complicated web of rules. It does little to change the long-term prospects for most families.
Focusing on established strategies is more likely to give kids a genuine financial head start. A 529 plan, a Roth IRA, or an expanded child tax credit offers real tax advantages, practical flexibility, and fewer headaches. The Trump Account is a financial dinosaur that belongs in a policy museum. It should be called the DINO Account, short for “Definitely Irrelevant Needless Offering.”
