The idea sounds simple: give every child a $1,000 head start on retirement. But the new Trump Accounts program comes with warnings about scams. The government deposit is just the beginning.
The U.S. Treasury Department will deposit $1,000 for each eligible child born between 2025 and 2028, once an account is opened. The Treasury has selected Bank of New York Mellon as the official manager for the initial accounts, while Robinhood created the Trump Accounts app.
Employers can also contribute, but their share counts toward the $5,000 limit - up to $2,500 per year per child.
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The projections are eye-popping. Assuming no additional contributions, the $1,000 initial deposit might reach $6,000 by age 18, $15,000 by 27, and $243,000 by 55, based on the S&P 500's historical average return exceeding 10%, per TrumpAccounts.gov. With annual maximum contributions of $5,000, the account could reach $271,000 by age 18, $742,000 by 27, and $13 million by 55, also based on the S&P 500's historical average return exceeding 10%. But Douglas Boneparth, a certified financial planner who leads Bone Fide Wealth in New York, pointed out that hitting nearly $1 million by the child's late 20s would require maxing out the account for many years along with "fairly strong, uninterrupted market returns." Market analysts at Morningstar project lower returns ahead, with simulations producing an average 6.3% annual return, per data provided to CNBC.
Supporters claim that putting money into American equities offers chances to build wealth for people at every income level. As one proponent told CNBC, "The returns on capital today are radically greater than the returns on labor, which means we have a growing wealth gap. Now we need to get capital into the pockets of every child born so that they can compound in the upside of SpaceX, in Alphabet, in all of our great companies, like everybody else in the market."
The $250 grant is funded by a $6.25 billion commitment from Michael Dell, the tech billionaire, and his spouse Susan, via the Dell Foundation. This grant targets children born between 2016 and 2024 living in ZIP codes with a median income of $150,000 or less. In NYC, about 754,200 kids qualify for the Dell grant, totaling $188.5 million, per data shared exclusively with CNBC by a Dell Foundation spokesperson. Another 186,900 NYC children qualify for the Treasury's $1,000 seed deposit, representing $186.9 million in government contributions, the spokesperson added.
Many corporations have promised to contribute matching funds for their employees' children to the Treasury's deposit, and donors in multiple states have offered extra payments for specific eligible families. Treasury Secretary Scott Bessent has hinted at more commitments ahead, and there are reports that business leaders and philanthropists might eventually donate stock to these accounts.
The Treasury Department issued a blunt warning: "If you receive a call or text about a Trump Account, do not respond, it is likely a scam." The program is real, but scammers are already trying to exploit it. The official launch is July 4, and deposits will start going out after that. The Treasury Department says that any official account messages will come from [email protected]. Additionally, Treasury guidance advises using the Trump Accounts app or entering TrumpAccounts.gov directly in your browser to access your child's account.
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