A Child’s Trump Account Could Grow to $5.5 Million—or Just $39,000

Trump Accounts, which launched on July 4, are intended to give children a financial head start through long-term investing—but there is a wide range of possible outcomes. According to our calculations, the average balance at age 55 could be as low as $39,000 for a child who only receives the $1,000 federal seed contribution, or as high as $5.5 million for a child who receives ongoing contributions until age 18.

I estimated how account balances could grow under a range of contribution scenarios, while also accounting for the possibility that beneficiaries withdraw their assets after they can access them.

Key Takeaways

• The $1,000 federal seed contribution can grow meaningfully over time, but, intuitively, long-term wealth accumulation is driven primarily by ongoing contributions from families and employers.
• Long-term wealth outcomes depend on whether account balances remain invested after beneficiaries gain access. The literature on retirement accounts suggests that smaller balances are more likely to be liquidated.
• The wealth-building potential of Trump Accounts may vary considerably across households, with beneficiaries from higher-income households more likely to potentially receive ongoing contributions and remain invested for the long term.

To model the growth of Trump Accounts, I simulated 1,000 wealth paths through age 55 for a child receiving the program’s one-time $1,000 federal seed contribution at birth. I modeled investment returns stochastically based on Morningstar’s US large-cap capital market assumptions, net of an annual fee of 10 basis points. The analysis also considered a range of scenarios, including a one-time employer contribution and ongoing annual contributions from families, employers, or both.

Because beneficiaries may withdraw their account balances after they gain access, I also modeled the possibility of account liquidation at ages 18 and 30. Refer to the appendix for more detail on the methodology.

Note that we’re talking about accounts for kids, not the separate retirement proposal announced during the State of the Union address in February; I analyzed the implications of that proposal in a prior piece.

Projected Balances in Trump Accounts

To show the variety of outcomes, let’s look at the projected balances at ages 18, 27, and 55. The projections include the lower quartile (the 25^th percentile), the median, the mean, and the upper quartile (the 75^th percentile). For example, the lower-quartile balance indicates that 25% of the simulated balances within a given contribution scenario fall below that value.

Here are the projected beginning-of-year account balances at age 18, assuming the assets are not liquidated. The numbers are not adjusted for inflation.

The projections at age 27 do reflect assets being liquidated, which is why some of the balances are $0.

At age 55, the projections are significantly higher, reflecting the long-term effects of compounding. Because these balances are reported in nominal dollars, not adjusted for inflation, their purchasing power will be lower.

At all ages, the projected account balances increase as annual contributions rise. While the scenarios with only one-time contributions can increase meaningfully over time, the results suggest that long-term wealth accumulation is driven primarily by ongoing family and employer contributions.

When Beneficiaries Have to Liquidate

The impact of account liquidation is also evident in the results. While all balances are positive at age 18 because withdrawals are not permitted before then, the age-27 and age-55 distributions include a meaningful number of $0 outcomes. The effect is particularly pronounced among lower-balance scenarios, where the cashout rates, based on Vanguard preservation rates data, imply a greater likelihood of liquidation.

More broadly, the children who stand to benefit the most from additional savings, relatively, may also be those most likely to face immediate financial needs that lead to spending the assets once they become available.

While the higher contribution scenarios can generate substantial wealth accumulation, they may be difficult for many households to sustain in practice. To illustrate the affordability of the contribution scenarios, I created a set of stylized household-income levels informed by the 2022 Survey of Consumer Finances. These values are loosely based on the income distribution observed among married households under age 45 but have been rounded and simplified.

Long-Term Wealth Depends on Saving Behavior

Overall, the results suggest that Trump Accounts have the potential to generate substantial wealth over longer time periods, but outcomes are likely to depend heavily on ongoing contributions and whether account balances remain invested after access is obtained.

While early withdrawals may often represent reasonable financial decisions, they nevertheless reduce the accounts’ long-term wealth-building potential. Thus, the accounts are likely to have the greatest long-term impact for beneficiaries who receive ongoing contributions and preserve their balances over time.