Trump Accounts Hit 7M Enrollees, Raising New Questions for Advisors

It turns out the newest buy-and-hold investors still need diaper changing.

Seven million children have already been enrolled in Trump accounts that are designed to give young Americans an early stake in public markets. The accounts, which are seeded $1,000 if the child is born between 2025 and 2028, invest in low-cost index funds and ETFs and are locked until age 18. Yet despite rapid adoption, the wealth management industry remains split. Some see them as an essential gateway to capital markets, while others consider them a lesser alternative to existing options.

“Trump Accounts are training wheels for a lifetime of investing,” said Aaron Schumm, founder of savings platform Vestwell. “A child who grows up with one arrives at their first job in a totally different position than someone opening their first 401(k) at age 24.”

Born to Buy and Hold

Around 50 major employers, mostly Wall Street institutions and Big Tech firms, have already begun contributing to employees’ kids’ accounts. With standard 401(k) plans now table stakes, these contributions help companies stand out. “Every employer is always asking ‘How can I help my employees save for their future?’” Schumm told Retirement Upside. “The more robust your benefits package is, the more attractive it is to work at your company.”

Still, because the accounts launched less than a month ago, wealth managers urge caution, advising clients to claim the free $1,000 seed money but prioritize other vehicles first. “If a client has funded their retirement and a 529 plan, and they have extra money, then Trump Accounts could be another option for tax-deferred growth,” said Daniele Griffith, director of tax operations at April. However, she warned that investment choices are overly restrictive and heavily skewed toward US large-cap equities, omitting international stocks or individual holdings.

Then comes the issue of financial maturity:

• If parents contribute $5,000 annually, a Trump Account could swell to nearly $200,000 by the time their kid turns 18. 
• Early withdrawals trigger steep penalties, and young adults need to be responsible enough to recognize that. 

“You might say, ‘Use that to buy a house or go to college.’ But Junior might say, ‘No, I’m going to live in Fiji for a few years,’” Griffith told Retirement Upside.

Growing Pains. While she expects the sign-up process to be streamlined and simplified over time, Griffith said almost all of her clients have had trouble registering their children for the accounts, which required filling out an IRS form that could be submitted along with their most recent tax returns. “They’re receiving letters saying they had incomplete information on their tax return and they’re being asked to submit additional information,” she said. “Maybe it’s just because the program is new, but there do seem to be administrative gaps.”