What a Trump Account actually costs and what it delivers
A Trump Account is worth it if you want a tax-sheltered way to save for a child's future and you can afford the account fees. The real question is whether the tax benefit outweighs the cost, and that depends on how much you plan to save and what your income level is.
Trump Accounts charge an annual maintenance fee—typically $25 to $50 per year depending on the provider—plus investment management fees that usually range from 0.5% to 1.5% of the balance. Those fees come out of the account, which means they reduce your savings. If you're saving $500 a year for a child, a $50 annual fee eats 10% of your contribution. If you're saving $5,000 a year, the same fee is only 1% of what you put in.
The tax benefit is real but limited. Money grows tax-free inside the account, and withdrawals for may have access to education expenses (tuition, room and board, books, computers) are not taxed. If you're in a 24% federal tax bracket and save $2,500 a year for 10 years, the tax savings could reach $6,000 or more. But if you're in a lower bracket or saving smaller amounts, the benefit shrinks.
Key Takeaways
- Trump Accounts make financial sense when you plan to save $2,000 or more per year, because the tax benefit then exceeds the annual fees.
- The account is worth opening if the child will attend college or trade school, since withdrawals for those expenses avoid taxes on the growth.
- If you expect to pay for education with financial aid, scholarships, or out-of-pocket cash anyway, a Trump Account reduces the tax hit on that money.
- Opening an account costs nothing, but you should compare fee structures across providers before choosing one, because fees vary significantly.
When the math works in your favor
The Trump Account becomes worth it at specific savings levels. If you contribute $1,000 per year for 15 years and earn 5% annual growth, you'll have roughly $23,000 at the end. The tax-free growth saves you somewhere between $1,500 and $3,000 depending on your tax bracket—enough to cover 3 to 6 years of fees. Below that savings level, fees eat too much of the benefit.
The account also makes sense if you have a child who will definitely attend college or a trade school. The more certain the education expense, the more valuable the tax shelter. If you're unsure whether your child will go to college, or if you think scholarships will cover most costs, the benefit becomes less clear.
Your income level matters too. If your household income is under $50,000, you may not pay enough in taxes for the tax-free growth to matter much. If your income is over $100,000, the tax benefit is larger. Check your own tax bracket before deciding.
Comparing Trump Accounts to other savings methods
A Trump Account is not the only way to save for education. A regular savings account or money market account has no fees and no tax benefit—you pay taxes on the interest earned each year. A Coverdell Education Savings Account works similarly to a Trump Account but has lower contribution limits ($2,000 per year) and higher income restrictions. A 529 plan, which is a state-sponsored education savings program, often has lower fees than Trump Accounts and sometimes offers state tax deductions.
If your state offers a 529 plan with low fees (under 0.5% per year), that may be a better choice than a Trump Account. If your state's 529 plan charges high fees or offers no state tax benefit, a Trump Account may be competitive. The best choice depends on your state, your income, and how much you plan to save.
If you're saving less than $1,000 per year, a regular savings account is simpler and costs nothing. The tax on a few dollars of interest is negligible, and you avoid account fees entirely.
What happens if your child doesn't go to college
This is the real risk. If you withdraw money from a Trump Account for anything other than may have access to education expenses, you pay income tax on the growth plus a 10% penalty. If you saved $5,000 and it grew to $7,000, you'd owe income tax plus a 10% penalty on the $2,000 gain—potentially $600 to $800 depending on your bracket.
There are a few exceptions. If your child receives a scholarship, you can withdraw that amount penalty-free (though you still pay tax on the growth). If your child attends a military academy or trade school, those count as may have access to expenses. If your child dies or becomes disabled, the account can be closed without penalty.
The penalty is harsh enough that you should only open a Trump Account if you're reasonably confident the money will be used for education. If there's a real chance your child won't attend college, a regular savings account is safer.
How to decide: the three questions to ask yourself
First: How much will you actually save? If the answer is less than $1,000 per year, the fees will outweigh the tax benefit. If it's $2,000 or more per year, the account is probably worth it.
Second: Will your child go to college or trade school? If yes, the account makes sense. If you're unsure, a regular savings account is safer. If no, don't open one.
Third: What are the fees? Call or visit the websites of at least two providers and compare annual maintenance fees and investment management fees. A difference of 0.5% per year adds up to hundreds of dollars over time.
If you answer yes to the first two questions and find a provider with reasonable fees, a Trump Account is worth opening. If you answer no to either of the first two, it probably isn't.
Opening an account and keeping costs down
Opening a Trump Account takes 15 to 30 minutes. You'll need the child's Social Security number, your own identification, and a funding method (bank account or check). Most providers let you open an account online with no upfront cost.
To keep costs down, choose a provider with low annual fees and low investment management fees. Some providers charge $25 per year; others charge $50. Some charge 0.5% of assets; others charge 1.5%. Over 15 years, that difference can mean $1,500 to $3,000 in extra fees. It's worth 20 minutes of research to find the cheaper option.
You can also reduce fees by automating your contributions. Many providers waive or reduce the annual fee if you set up automatic monthly deposits. If you contribute $200 per month instead of a lump sum, you may save $25 to $50 per year in fees.
Frequently Asked Questions
Can I move money from a Trump Account to a 529 plan?
Yes. As of 2024, you can roll up to $35,000 from a Trump Account into a 529 plan without triggering taxes or penalties, as long as the 529 account has been open for at least 15 years. This is useful if you find a 529 plan with lower fees after opening a Trump Account. Check with your new provider about their rollover process.
What if I change my mind after opening the account?
You can close a Trump Account at any time. If you withdraw money that was used for non-education expenses, you'll owe income tax and a 10% penalty on the growth. If you withdraw only contributions (the money you put in), there's no tax or penalty. The growth is what triggers the penalty.
Does a Trump Account affect financial aid?
Yes. Money in a Trump Account counts as an asset when you fill out the FAFSA (Free process for Federal Student Aid). Assets reduce the amount of need-based financial aid your child may receive. The impact varies by school and family income, but generally, each dollar in a Trump Account reduces aid by 5 to 6 cents. This is a real cost you should factor in.
Can grandparents open a Trump Account for a grandchild?
Yes. Anyone can open a Trump Account for a child, as long as you have the child's Social Security number and permission from a parent or guardian. Grandparents often use Trump Accounts as a way to gift money to grandchildren while reducing their own taxable estate.
Is there a minimum amount I have to contribute each year?
No. You can contribute as little as $25 per year or skip a year entirely. However, if you contribute very small amounts, the annual fees will eat a large percentage of your savings. Most providers recommend contributing at least $1,000 per year to make the account worthwhile.