How do ‘Trump accounts’ work – and who will benefit?

A tech billionaire and his wife said on Tuesday they would pour $6.25bn into individual investment accounts for 25 million children under 10, prompting a wave of new questions about how these so-called “Trump accounts” will work.The creation of these accounts was included as part of Donald Trump’s massive tax and spending bill, which he signed into law in July. Every child born between 1 January 2025 and 31 December 2028, can receive a Trump account that includes a $1,000 initial deposit from the administration. The money will then be invested.“Trump accounts will be the first – I guess you could say – first real trust funds for every American child, allowing family members, employers, corporations, generous donors to contribute money that will be invested and grow,” Trump said in a press conference at the White House that focused on the $6.25bn donation.As part of the press conference, the White House on Tuesday provided further information about the future of Trump accounts. Many details, however, remain scarce.Who is eligible for a Trump account?Anyone who has a social security number and is under the age of 18 may open a Trump account. However, the Trump accounts will not go live until 4 July 2026.Parents and guardians are responsible for setting up and managing the accounts.Who can contribute to a Trump account? And how much can they give?Children, parents or guardians, family members, friends, and employers may contribute up to $5,000 per year per child. The $1,000 contribution from the US government will not count against that limit.Philanthropists, charities and some government entities – such as states or tribes – may also contribute without limit.What about that $6.52bn contribution?That money, gifted by Michael Dell and his wife, Susan, will go to children who live in zip codes where the median household income is below $150,000 per year. Each qualifying child is set to receive about $250.What happens to the money in Trump accounts?It will be invested in a diversified, low-cost stock index fund that tracks the overall stock market. Private companies will manage those funds.When can you take money out of a Trump account?Withdrawals are only permitted once a child turns 18. However, those withdrawals come with a big asterisk: at that point, a Trump account effectively functions like a traditional retirement account, which means that any withdrawals could come with a hefty tax penalty.The White House said Tuesday that there will be some exceptions to that rule, such as “higher education expenses or first home purchases”. Charles Schwab, the brokerage firm, has created an explainer with further details about Trump accounts and taxes.Will Trump accounts help lift more US children out of poverty?Not immediately, if at all. The Trump administration’s tax and spending bill included sweeping cuts to programs such as Medicaid and Supplemental Nutrition Assistance Program (Snap), or food stamps. Experts fear that, without the help of programs, low-income families will be unable to provide for their children or help them succeed.Critics have also argued that Trump accounts are designed to incentivize people into having more children, since the administration has reportedly toyed with various pronatalist policies, such as giving $5,000 “baby bonuses” to women who give birth.“As currently structured, these accounts will just become another tax shelter for the wealthiest, while the overwhelming majority of American families, who are struggling to cover basic costs like food, child care, and housing, will be hard pressed to find the extra money that could turn the seed money into a meaningful investment,” Amy Matsui, vice-president of income security and child care at National Women’s Law Center, said in a statement ahead of the Tuesday press conference.“Moreover, the law prevents many children in immigrant families from benefiting altogether.”