Trump Account forecasts depend on decades of strong market returns
Government projections show large gains for children’s accounts, but advisers say taxes, market returns and control at age 18 matter.
By Hana Yoshida · Markets Reporter
3 min read
New Trump Accounts can show parents large projected balances for children who start investing early, including millionaire outcomes by midlife. Financial planners told Fortune the accounts may be useful, but the government calculator’s results depend on decades of strong market performance and on the child leaving the money alone.
TrumpAccounts.gov shows that a $250 annual contribution could grow to $19,000 by age 18 and $878,000 by age 55, according to Fortune. At the $5,000 yearly maximum, the government site projects $271,000 by 18 and $13 million by 55.
Fortune reported that those figures use the S&P 500’s historical annual return of more than 10% and assume that rate continues for 55 years. Morningstar data provided to CNBC suggested U.S. stock market returns over the next decade could average about 6.3% a year.
How the accounts work
Trump Accounts are tax-advantaged investment accounts for children created under President Donald Trump’s tax law, Fortune reported. The accounts operate like traditional IRAs, according to the Congressional Research Service, but special rules apply during the growth period from birth through the year before a child turns 18.
The IRS says eligible babies born from 2025 through 2028 receive a one-time $1,000 deposit from the U.S. Treasury. Families, friends and others may contribute up to a combined $5,000 a year in after-tax dollars, with the cap indexed for inflation after 2027, according to the Congressional Research Service.
Several advisers who spoke with Fortune used more cautious return assumptions than the government website. Pam Krueger, a registered investment adviser and founder of Wealthramp, calculated that a family contributing the maximum from birth through age 18, along with the $1,000 Treasury deposit, would put in about $91,000.
At a 7% long-term annual return, Krueger told Fortune, the account could be worth about $185,000 by age 18. If untouched, she estimated it could exceed $1 million by age 45, with most of the eventual value coming from compounding rather than deposits.
Mitch Hamer, founder and lead adviser at Intersecting Wealth, told Fortune he modeled a similar account for his 5-year-old son. Using a 7% return, Hamer projected maximum annual deposits could reach $1 million by age 45 and $3 million by age 60; at 8%, he estimated $1.4 million at 45 and $4.5 million at 60.
Risks advisers highlighted
Krueger told Fortune the projections are not guarantees and that small differences in long-term returns can move the final balance by hundreds of thousands of dollars. The tax treatment also matters: the Bipartisan Policy Center says withdrawals are taxed as ordinary income, and U.S. Bank says the account becomes a traditional IRA when the child turns 18.
That conversion means withdrawals before age 59½ may face a 10% penalty unless an exception applies, such as education or a first-home purchase, Fortune reported. Krueger warned that families should not confuse tax-deferred growth with tax-free withdrawals.
Advisers also pointed to control at age 18. Matthew Chancey, founder of Tax Alpha Companies, told Fortune that parents are no longer in charge once the child reaches adulthood, creating the risk that a young account owner could tap the money during a difficult period.
Where advisers say it fits
Financial planners told Fortune that Trump Accounts should not replace a parent’s own retirement savings. Chancey said parents should first capture any available employer 401(k) match because that match is additional compensation.
For college-focused families, Krueger told Fortune she would generally prioritize a 529 plan for its education tax benefits, then consider a Trump Account. Advisers said the Trump Account can be more flexible than a 529 for families unsure about college and can start earlier than a custodial Roth IRA because it does not require the child to have earned income.
Fortune reported that Uber, Intel, IBM and Nvidia are among companies that have pledged contributions to workers’ Trump Accounts as an employee benefit. Employer contributions may reach up to $2,500 a year per employee and count toward the $5,000 annual limit.
This story draws on original reporting from Fortune.