The Government Can Do Better Than Trump Accounts

National Review Online

Friday, January 30, 2026

 

Planning to have a baby in the next three years? If the answer is yes, the president wants you to sign your child up for an eponymous Trump Account. You’ll find a cool grand in there, courtesy of the U.S. Treasury, and you can deposit additional money to invest tax-free for your child’s future. What’s the catch?

 

There doesn’t seem to be one, at first glance. Every American child born between the start of 2025 and the end of 2028 is eligible to receive $1,000 when their parent opens a Trump Account, which becomes available on July 4, 2026. Individuals and employers can then contribute up to $5,000 per year, and organizations such as governments and charities can deposit unlimited amounts. The intent is for children to start building wealth from the youngest possible age, growing with the market over decades until they spend it in adulthood.

 

It’s not an entirely free lunch, however. Although investments grow tax-free within the Trump Account, withdrawals will ultimately be taxed as regular income. Critically, individual contributions are not tax-deductible. No withdrawals can be made until the child turns 18, and after that, withdrawals before age 59½ are considered early and face a 10 percent penalty. Altogether, Trump Accounts function as a significantly less-advantageous version of a traditional IRA.

 

Further disappointing is that the types of investments available to account holders are strictly regulated. Owners of Trump Accounts are limited to purchasing mutual funds and ETFs that track broad stock market indices, such as the S&P 500. Funds must be 90 percent allocated to U.S. companies, and their expense ratios can be no higher than 0.10 percent. Such paternalistic measures are usually included when taxpayer money is at stake, whereas fully private retirement accounts offer far greater financial choice.

 

As for the merits of the policy, Trump Accounts are bound to disappoint. They are certain to build some wealth, as the rule of compound interest ensures that recipients will get many multiples back on their $1,000 gift. But pro-natalist politicians like JD Vance are more ambitious in hoping this modest subsidy may help spark a baby boom.

 

Most American families don’t need yet another entitlement program. If the federal government wanted to help them more efficiently, it could give them the money it’s spending on Trump Accounts directly, such as through an expanded child tax credit. Parents could decide to use those funds to invest in their child’s name for the future without restriction, or instead spend on more immediate expenses like child care or education. Yet Congress opted to cheap out on the child tax credit during reconciliation, leaving its value lower today, adjusted for inflation, than in 2018 when the Tax Cuts and Jobs Act took effect.

 

As for tax-advantaged savings accounts, the government should consolidate the existing options, not add complexity by creating new ones. A winning proposal is the Universal Savings Account, which would allow after-tax contributions from any source, up to an annual limit. It would then allow account holders to withdraw money at any time and for any purpose, free of taxes or penalties. If Congress authorized such an investment vehicle, it would be more attractive than any retirement, college, or health savings account on the market.

 

After the Trump Accounts program expires in 2029, the government should shift focus to enabling families to spend and invest their own money as they see fit — not sending them taxpayer checks and micromanaging how they use the money.