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Back in 2015, I wrote that Donald Trump wasn\u2019t a political figure and I couldn\u2019t understand why anyone treated him like one. That take aged\u2026 poorly. A decade later, he couldn\u2019t be more political \u2014 and now there\u2019s an investment account with his name on it. I\u2019ve got thoughts about the politics, but I\u2019ll save them for the end. First, let\u2019s cover the practical ins and outs of Trump Accounts and how they might play a role in your child\u2019s future.<\/p>\n
Trump Accounts launched on July 4th (of course they did). If your child is a U.S. citizen born between January 1, 2025 and December 31, 2028*, the government will put $1,000 into their account. You do have to actually open a Trump account with a form at tax time or a quick sign-up online. The money goes into low-cost index funds, and anyone \u2014 you, grandparents, friends \u2014 can add up to $5,000 a year in after-tax dollars. Employers can chip in $2,500 of that tax-free. It\u2019s all locked up until 18, when the whole thing essentially becomes a traditional IRA. Kids born outside the window can open accounts too; they just don\u2019t get the free $1,000.<\/p>\n
(An aside: This BBC keeps calling these \u201cschemes\u201d<\/a>) It gave me a laugh. Maybe that\u2019s a British thing? Anyway, given what I\u2019m about to write, the word doesn\u2019t feel wrong.)<\/p>\n Now, the projections. The government\u2019s own app shows $250 a year turning into $19,000 by age 18 and $878,000 by 55. Max it out at $5,000 a year and the app says $13 million. Fortune asked four financial planners to check the math]<\/a>, and their answer was basically: pump the brakes. Those projections assume the market\u2019s historical 10%+ every year for 55 straight years; Morningstar thinks the next decade could average closer to 6.3%. At a more sober 7%, a maxed account is worth about $185,000 at 18 and $1 million by 45. Still great! But \u201cmaxed\u201d means $5,000 a year for 18 years \u2014 roughly $91,000. Most families aren\u2019t doing that in this account or any other.<\/p>\n Michelle Singletary at the Washington Post wrote my favorite breakdown of the fine print<\/a> (gift article) \u2014 a half-dozen reasons to keep expectations in check. Her bottom line on the seed money alone: by 18 it looks \u201cless like a fortune and more like a down payment on a new car.\u201d Beyond that, contributions aren\u2019t tax-deductible going in, and the growth is taxed as ordinary income coming out \u2014 a worse deal than the capital gains rate in a plain old brokerage account. The seed is a four-year pilot, so extending it \u2014 or fixing that clunky tax treatment \u2014 requires a future Congress to pass future tax legislation. A plan that depends on a future Congress doing something sensible isn\u2019t a plan. (Exhibit A: this Social Security mess<\/a>) And at 18, your kid gets full control of every penny. I like to think I was fairly responsible with money at age 18, but I probably wasn\u2019t that responsible.<\/p>\n So, should you open one? If your child qualifies for the $1,000: Yes<\/b>. It\u2019s free money and one form. My kids missed the eligibility window by more than a decade. However, if they\u2019d been born in it, my politics could survive some paperwork.<\/p>\n Also, if your company offers matching funds, it is definitely worth it. It\u2019s almost always worth getting as much matching money from your company as possible. That\u2019s been true with 401ks for decades.<\/p>\n For your own dollars, though, I think the 529 is still the better home<\/a>. Friends and family can gift into a 529 too. It\u2019s more flexible than its reputation \u2014 trade schools, apprenticeships, and some K-12 costs count, not just college. And if education isn\u2019t in the cards, current law lets you roll up to $35,000 of a leftover 529 into a Roth IRA, where it effectively becomes a better retirement account than the Trump Account would have been. I think. (There\u2019s fine print\u2026 the 529 has to be at least 15 years old and the rollover happens gradually.)<\/p>\n Nicole Russell at USA Today wrote a column titled Trump Accounts are free money. Don\u2019t let politics stop you.\u201d<\/a> Her argument is that parents who refuse to open one because they can\u2019t stand Trump are putting party ahead of their own child\u2019s future. On that narrow point, we agree. Get your free $1,000.<\/p>\n However, I have a few problems with the rosy version she\u2019s selling. She leans on that same government projection \u2014 the $1,000 seed alone becoming $243,000 by age 55 \u2014 which assumes 10%+ returns forever and, as the fact-checkers at PolitiFact noted, skips inflation and taxes. As you might imagine, inflation over 55 years is\u2026 not trivial. More importantly, the life-changing version of this program touches a very small slice of kids: the ones whose parents, grandparents, and employers pour in thousands of dollars a year. Most of the benefit doesn\u2019t come from the government at all. It comes from friends, family, and companies \u2014 every one of whom could already give money to a 529 or a custodial account, without the ordinary-income tax hit and without the strings. The $1,000 is real. The $13 million is a brochure.<\/p>\n And here\u2019s the part that really gets me. The administration has been rounding up employers \u2014 Uber, Intel, Nvidia, IBM, dozens more \u2014 to contribute up to $2,500 a year for their workers\u2019 kids. Good for them, sincerely. But the United States federal government is the largest employer in the country, with roughly two million civil servants plus 1.3 million active-duty military personnel. It hasn\u2019t offered its own workforce the benefit it\u2019s asking every other employer to provide. We\u2019re a military family, and we get plenty of benefits due to that, but we don\u2019t get to ask our employer to make the contribution. Instead, I\u2019m a shareholder of all the above companies, giving up that value.<\/p>\n I\u2019d also point out that Russell is a conservative political columnist \u2014 her USA Today newsletter is literally called The Right Track<\/a> \u2014 not a financial planner. Nothing wrong with that (said in my Seinfeld voice). But \u201cdon\u2019t let politics stop you\u201d lands a little differently coming from someone whose beat is to promote that political side.<\/p>\n Which brings me to my bigger question: why intentionally make a savings vehicle political in the first place? Bill Clinton signed the law that created 529 plans in 1996, and somehow nobody has ever asked me to open a Clinton Account. And if we are keeping political score: Hillary Clinton floated $5,000 baby bonds for every newborn back in 2007<\/a>. Run that through an S&P 500 calculator<\/a> and a kid born that year would be leaving high school about now with roughly $35,000 \u2014 $21,868.13 after adjusting for inflation. The response from the political right at the time? The Republican National Committee dismissed the idea as a \u201cbudget busting baby fund,\u201d and Rudy Giuliani said it was proof Clinton was running a campaign built on pandering.<\/p>\n The Politics of Trump Accounts<\/h2>\n