Major corporations and philanthropists, including Bank of America and JPMorgan, have shown support for Mr. Trump’s new account initiative. They announced on Wednesday a plan to match $1,000 in government deposits for accounts opened by employees. However, experts noted that this initiative likely won’t replicate the benefits of a 529 plan.
Parents can establish accounts for children under 18 who possess a Social Security number. For infants born between 2025 and 2028, the U.S. Treasury will provide an initial $1,000 to start the account.
However, compared to the benefits provided by a 529 plan—meant for college savings—or a Roth IRA, which allows for tax-free withdrawals, Mr. Trump’s account falls short. Withdrawals from this account will be taxed, and funds must be saved in low-cost index funds.
Ken Mahoney, CEO of Mahoney Asset Management, stated that some might think, “If you put $1,000 in mine, I’ll take it!” He added, though, that there’s no real need to alter existing college savings plans that families have already established with 529 accounts. He believes, “The old…529 plan is much better.” Withdrawals from Trump’s account won’t be permitted until the child turns 18, at which point the savings will transition into an IRA and be taxed.
The Trump Account was introduced through last year’s One Big Beautiful Bill Act, a significant piece of legislation aimed at simplifying the process for corporations and philanthropists to contribute to these accounts on a larger scale. Contributions to Mr. Trump’s account are capped at $5,000 a year, while employer contributions are limited to $2,500 annually.
Nathan Goldman, a member of the American Accounting Association and a professor at North Carolina State University, mentioned that this system resembles a 401K match because it’s essentially free money. However, he pointed out that the initial $1,000 seed money, along with other contributions, will remain locked in the account until the child reaches 18, which means those solely looking for immediate gains might be disappointed.
The initiative seems aimed at winning over voters who are skeptical about the substantial corporate tax cuts tied to Trump’s Big Beautiful Act, according to Goldman, who wonders whether the impact will be significant or merely cosmetic.
Trump accounts are marketed as alternatives to 529 plans, which impose a hefty 10% penalty on withdrawals not used for educational expenses. Funds from this new account could be utilized for education, starting a business, or even for a house down payment.
Goldman suggested that parents might consider a mixed strategy, placing 75% of their savings in a 529 plan while allocating 25% into a Trump account. Even though many high school graduates today opt out of college, the majority still pursue higher education. It’s also uncertain how often parents might find themselves stuck with large sums in underutilized 529 accounts.
Some critics of the initiative argue that it provides little support to low-income families and does nothing to counteract cuts to essential programs such as food assistance and Medicaid included in the “One Big Beautiful Bill.”
To set up a Trump Account for your child, you’ll need to complete IRS Form 4547. If eligible, you can also opt for the $1,000 Treasury contribution on this form, which can be submitted at any time. Information will be sent to parents in May to enable them to activate their accounts.
Prior to the announcements from Bank of America and JPMorgan, Michael and Susan Dell pledged $6.25 billion to this account initiative. Additionally, rap artist Nicki Minaj attended a summit promoting the program with Mr. Trump and is expected to contribute between $150,000 and $300,000 to the account.
