Trump Accounts are meant to give every American child a stake in the stock market from birth. Now the Treasury wants to make sure fees do not quietly shrink that stake.
The Treasury Department proposed new regulations for what investments can go into the accounts. The rules would limit the options to low-cost funds, meaning funds that charge small annual fees, known as expense ratios.
"Every dollar in a child's Trump Account should be working toward that child's financial future, not diminished by unnecessary fees," Treasury Secretary Scott Bessent said.
Bessent said the Treasury is putting commonsense protections in place under President Trump's leadership to help families hold on to more of what their investments earn.
The Treasury release said focusing on straightforward, low-cost choices "would allow children to benefit more fully from decades of compound growth and ensure that a greater share of investment returns remain in their accounts."
Compound growth is when your returns start earning returns of their own. Over a few decades, that effect can turn small contributions into something much bigger.
Contributions currently flow into ETFs that track the S&P 500, the index of 500 large U.S. companies. An ETF, or exchange-traded fund, is a basket of stocks you can buy and sell like a single stock.
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The Treasury had already picked the State Street SPDR Portfolio S&P 500 ETF (SPYM) as the default investment. Families can also choose from four other funds:
All of them track a broad slice of the U.S. stock market. Bank of New York Mellon is the official manager behind the accounts.
Families can monitor balances through the Trump Accounts app, which Robinhood helped build.
The whole point of the proposed rules is that small fees add up. Frank Bisignano, the CEO of the IRS, put it plainly: "For a child investing over decades, even small differences in annual costs may have a meaningful effect on the amount available in adulthood."
A small difference in the yearly fee can look like nothing at first. But when the money stays invested for decades, that gap compounds right along with the gains, and the account ends up smaller than it should be.
The proposed rules would also apply if a family moves the account to a new custodian, the company that holds the account. So the low-cost protection follows the money.
Robinhood CEO Vlad Tenev said on CNBC's "Squawk Box" that the goal is to make it easy for every American to own a slice of the country's biggest companies from birth. "We wanted to make it as easy as possible for every American starting at birth to get access to the great American economy, to get ownership of these companies from birth and see the magic of compound interest," he said.
Tenev also made the case for keeping the starting point simple. "Over time, there's been discussion about more options, but I think the default of a diversified portfolio of the most prominent companies has been a great way to start and has been very effective," he said.
For a child whose account starts at birth, decades of compounding sit ahead. Every bit of return that stays in the account instead of going to fees is working for that child.
The proposed rules aim to make sure that stays true even if the account changes hands. If a family moves the account to a new custodian, the same low-cost protections would apply.
For anyone opening a Trump Account for a kid, the math is simple. The less the account leaks to costs, the more the child keeps.
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