We have young kids. I manage money professionally. I’m not planning on opening a Trump Account for either of them.
Trump Accounts are designed to serve a specific purpose. To help your child get a head start on saving for their retirement. Sounds good right?
Here are the disadvantages in how these accounts are designed:
- Your child takes control of the funds when they turn 18
- It detracts from college funding
- It’s an inefficient way to fund your kids’ retirement
- Life’s big expenses are front-loaded
Your child takes control of the funds when they turn 18
I’m going to give an 18 yr-old $187,251 on their birthday and see what they do with it. Good idea, right?
That’s what $5,000 a year for 18 years into a Trump Account earning a hypothetical 8% a year grows to. And then the kids legally get the keys to the playground on their 18th birthday.
Sure, it’s technically a retirement account with a 10% penalty if you withdraw before 59.5.
But I’m not convinced every 18 yr-old thanks about the $18.7k penalty when they’re looking at the $170k+ payday they get to keep. (And yes, they forgot to account for taxes on emptying the account so now they owe money).
Every account and planning strategy has pros and cons. Funds growing tax-free is definitely a Pro of the Trump Accounts. My kids automatically taking control of the funds at 18 feels like a big Con.
It detracts from college funding
I’m guessing that if you’re the type of parent who has read this far, you already have colleges in mind that you want your kids to go to. Even if college is almost two decades away.
According to the Education Data Initiative1, the all-in, four-year cost of a private, non-profit college degree is $226,512. And costs have been growing at 4.04% a year.
If trends continue, then 18 years from the now the all-in cost will be $462,059.
529 plans were created to help with this immense cost. Like Trump Accounts, the contributions grow tax-deferred until you need them.
But unlike Trump Accounts:
- Contributions going in are tax deductible in many states
- Funds used for qualified expenses are not taxed on their way out
If your state has tax deductions for 529 contributions and you plan to send your kids to college, max out your college savings first before putting money in the Trump Accounts.
It’s an inefficient way to fund your kids’ retirement
I’m 40. Sheila probably won’t appreciate me saying exactly how old she is so I’ll just leave it at she’s slightly younger than me.
Our eldest is 4. By the time she’s 59.5 and can start accessing funds in a Trump Account without penalties, I’ll be 95.5. According to the CDC2, the average life expectancy of a male born in the US is 76.5. females are 81.4.
Maybe we make it two decades past the average person. But odds are we won’t.
We plan on leaving money for our kids.
Anything in a Roth they can tap tax-free even if they’re not 59.5 (as long as the account has been open at least 5 years).
Anything in a taxable brokerage account transfers to them essentially with capital gains reset to 0. That means all those funds will be available to them tax-free when they transfer over if they need it. More than likely before they’re 59.5.
If our daughter (or son) had a Trump Account, any gains over the amount that had been contributed would be taxed at her marginal income rate when she starts using the funds.
Life’s big expenses are front-loaded
Let’s say you’re 38 right now. You’re married and have two kids. You both have good, but not quite S-tier income from jobs you enjoy (more or less). You work in analytics. Your wife works in product management.
You’ve both been diligently saving for retirement and have built up about $1m between your 401k plans. But that doesn’t help you right now.
You’re trying to figure out how to pay for $42k a year in combined K-12 private school tuition while still getting to go on your twice yearly family vacations.
What would be more helpful?
A. Your parents decided to help you fund your retirement when you were a child. You have an additional $750,000 in another retirement account you can’t really touch until you’re 59.5. It’ll be nice to have then, but not life-changing.
B. Your parents set money aside in their brokerage accounts anticipating they’d one day help out when it was needed. They each gift you $19,000 ($38,000) every year for the next five years to help cover the cost. (There are all kinds of ways to handle how this is done to optimize for taxes. That will be the topic of a future article).
Having liquid optionality is highly underrated.
When I Would Use a Trump Account
I’m not fundamentally against Trump Accounts. There are scenarios where I would recommend or use them for our kids.
You qualify for free money.
By all means open an account if your’re being offered something for nothing. I can’t think of any reasons not to do these:
- Your child was born between Jan 1, 2025 and Dec 31, 2028 and they qualify for the $1,000 government pilot contribution. (Our kids don’t qualify)
- Your employer is planning to offer funding as part of their perks. (I am my employer)
You’ve maxed out your other options.
This would be a good problem to have. 529 is fully funded or on its way to being funded. You’re maxing your own 401k, IRA, and HSA contributions. Etc. Go ahead and fund the accounts, they are one of the few ways to get tax-deferred growth on your money. (We have a ways to go on our 529)
Know Your Tools
Take a step back and think about how you want to set your kids up for the future because there are all kinds of tax and planning quirks to be aware of or take advantage of depending on your goals.
Remember, Trump Accounts are just one tool in a wide array of options to help set your child up for their future. As with all tools, it helps to understand the mechanics of how they work relative to others and what your goal is.
If you’re thinking about your children’s future, check out our other posts:
Or feel free to reach out to me directly at [email protected] if you want a second opinion on financial planning for your children.
Nathan
Founder & Lead Advisor
Kangpan & Co. is a flat-fee financial advisor specializing in helping mid-career professionals navigate the tradeoffs between career, family, and money. If you liked this piece, check out my newsletter or follow me on LinkedIn for more content just like this.
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1. Education Data Initiative, Average Cost of College & Tuition, last updated 2026-02-14
2. CDC, Mortality in the United State 2024