Understanding How $1,000 “Trump Accounts” Could Grow from Nearly Half a Million Dollars to $22 Million

By Scott Hefty, Senior Wealth Manager and Founding Partner at Serae Wealth

IMPORTANT NOTE: Because past performance is not always indicative of future results, these figures are solely hypothetical and for illustrative purposes only.

According to recently passed federal legislation, every child born between 2025 and 2028 will automatically receive a $1,000 federal contribution into new child savings accounts, often referred to in the media as “Trump Accounts.” Currently, the federally funded child investment account functions similarly to a traditional retirement account. It offers tax-advantaged growth and penalty-free withdrawals after age 59 and a half. However, several exceptions allow for earlier use, including education expenses, buying a first home, or starting a business. In addition to the $1,000 federal seed, families can contribute up to $5,000 per year per child. Up to $2,500 of that total can come from a parent’s employer, which could be a powerful new form of employer benefit. Withdrawals are not allowed until age 18, which is when the account converts into a structure similar to a Traditional IRA with the same restrictions and penalties.

Based on estimations of past performance of similar accounts, the new $1,000 federally funded child investment account for newborns could grow from nearly half a million dollars to $22 million by the time the child retires. With an average return rate of ~10% annually, the $1,000 seed could grow to around $490,000 by retirement at age 65, even without any additional contributions. If a family were to contribute the full allowable $5,000 each year from birth through age 18, and the money grew at the historical average return of the S&P 500, that account could grow to $22.1 million by age 65.

However, if past financial tools are any indication, outcomes will likely vary widely. Of course, not every family will be able to contribute the maximum amount. But even a modest contribution, combined with the federal seed money, can be beneficial over time. Nearly every child who receives a federally funded child investment account will benefit in some way. The scale of that benefit will vary, but the baseline is an improvement over having no such account at all. If the program continues beyond 2028, the potential for long-term impact grows even further.

When pensions were phased out and replaced by 401(k) plans, those with access to financial education and the ability to save consistently benefited most. The same dynamic is likely to apply here. Individuals with the financial resources and knowledge to delay withdrawals and contribute more over time will be better positioned to take full advantage of this new model.

Ultimately, this account reflects a broader shift in how Americans build wealth across generations. We are moving toward a model where families, employers, and the federal government each play a part. As always, these projections are illustrative only and actual results will vary.