To “set [newborn Americans] on a course for prosperity from the very beginning,” Republicans in the US House of Representatives have introduced Trump accounts (PDF) in the House-passed reconciliation bill. These proposed Trump accounts, or tax-advantaged saving accounts, will serve every child in the US born between 2025 and 2028 to parents with Social Security numbers. These accounts would receive an initial federal contribution of $1,000, but families could contribute up to $5,000 a year.
This proposal emerges after years of research exploring the effectiveness of different early life wealth-building programs. But how does it measure up to the early life wealth-building principles agreed upon by the field’s leading researchers and practitioners?
In this post, we explore the alignment and misalignment of the proposed Trump accounts with these principles based on our work in the early life wealth-building field. We recognize the Senate may change features of this program through the reconciliation process, so we offer this assessment as a starting place for federal early life wealth-building policy more broadly.
What are Trump accounts?
As proposed, Trump accounts are an investment vehicle for children born between 2025 and 2028. Seeded with an initial $1,000 invested in a “stock of a regulated investment company (within the meaning of section 851)” (PDF), the account holder may use the money for homeownership, education, or small-business development once they turn 18. If funds are still in the account at age 31, account owners will have to withdraw the balance and pay income tax rates on the distributed funds.
In theory, these accounts offer an opportunity to introduce more Americans to wealth-building opportunities by providing them with meaningful sums of money that would be invested in capital markets to be used for asset-building purposes. However, research shows that successful early life wealth-building programs—such as statewide programs in Maine, Pennsylvania, and California—have centralized savings plan structures, like 529 accounts, reducing the operations costs, risks, and crucially, administrative fees for the participant. That the Trump accounts are started in the open market, outside of an omnibus or pooled structure, poses a serious risk to the program’s benefits—especially potentially eroding whatever investment gains may be realized, harming the low-wealth families that most need the accounts.
Further, the reality of most Americans’ financial lives—about a third of Americans do not have $2,000 in savings or enough surplus income to make stock-based investments which are, consequently, disproportionately made by wealthy people—indicates that early wealth accounts will struggle to unlock wealth-building opportunities for all Americans unless they’re paired with progressive deposits for families with low incomes (link added 6/11/2025). All early wealth programs should also strongly consider allowing for penalty-free emergency withdrawals, like those in the Setting Every Community Up for Retirement Enhancement 2.0 (PDF) (aka. Secure 2.0) Act, on a family's own contributions, or offering a “sidecar” savings account. Penalty-free (circumstantial) withdrawals help families manage short-term needs and access funds in an emergency.
The six principles for effective early life wealth-building accounts
In October 2023, the Urban Institute convened a group of researchers and practitioners with years of experience studying, designing, and testing early life wealth-building policy to establish a set of principles for the field:
- Start at the beginning.
- Ensure inclusion and reduce racial and other wealth inequities.
- Make real investments.
- Maintain structure, scale, and transparency (including creating and growing accounts in a centralized savings structure).
- Ensure ease of access and use.
- Support vertical connections.
These principles focus on improving administrative efficiency and cost-efficiency to ensure benefits for the greatest number of families, especially those with the lowest wealth and incomes, and to guarantee these programs don’t worsen wealth disparities. We have since used these principles as a North Star for evidence-based policymaking.
How do Trump accounts align with the principles?
As proposed, Trump accounts somewhat or mostly meet some of the guidelines established under the six principles. With an initial deposit of $1,000, the proposed bill offers a substantial initial deposit and leverages investment growth, though annual progressive deposits would improve the likelihood that all children benefit from this program. Reflecting on lessons from the field; with the accounts starting in the private sector and outside of a centralized savings plan structure, fees and administrative costs would be high, which could erode investment gains and reduce the appeal of these accounts among financial services firms.
In general, early life wealth-building programs should lay out a logical connection between the size of the initial deposit and the target size of the fund, with considerations for reasonable growth. Without a large-sum initial deposit and additional contributions, the accounts will not reach the amount needed to provide participants with access to further education, homeownership, and small business ownership. Existing early wealth-building programs, including savings accounts and baby bonds, invest between $50 and about $4,500 at birth.
In addition to these accounts, the bill also proposes the development and funding for a pilot program (PDF) that would automatically enroll eligible babies based on tax return information submitted by the child’s parent or guardian. Evidence suggests that automatic enrollment—especially in a “plan” structure (e.g., a 529 or 401(k) plan)—helps reduce barriers to access and increases the likelihood that all who could benefit from the program do, provided they’re aware of the program. As written, automatic enrollment would be challenging to implement for accounts started in the open marketplace, and the mechanism for submitting information is unclear, meaning it would likely depend on families filing a tax return, which many families with lower incomes don’t do.
How are Trump accounts and the principles misaligned?
In many ways, Trump accounts in their current form do not align with best practices established in research from the US and elsewhere. Based on our previous work, we see the following aspects of the bill as inconsistent with research and evidence:
- No centralized savings plan structure. Based on previous research, a centralized savings plan structure for automatic enrollment has proven effective in reaching all newborns, especially those in families with lower wealth.
- No exemptions of these accounts for the purposes of public benefit calculations. Without a specific investment type such as 401(k)s or 529 accounts used in state and local examples, these dollars will not be excluded from public benefit income thresholds, which could limit the likelihood that families with low incomes use these accounts to save.
- No guaranteed means to target additional contributions. Participants’ accounts will have to reach a significant sum to access the outlined wealth-building activities, but the proposal does not include any mechanism to further bolster the accounts of children who need these supports the most—though allowing external contributions could grow the balances for some families in certain areas. Though the proposed bill offers a substantial initial deposit, alone it will likely fall short of assuring necessary funds for recipients to partake in effective wealth-building activities (PDF).
- No mention of complementary financial advising or guidance. Evidence shows additional financial counseling for recipients and their parents helps reinforce the “positive effects on people’s saving, borrowing, and budgeting behavior.”
How Congress can build effective early wealth-building accounts
To best align with these principles and evidence-based best practices, any early life wealth-building proposals should include:
- An account vehicle with clear exemptions for the purposes of public benefits.
- A plan for larger deposits to go to families who need them most, with estimated account targets high enough to provide sufficient access to wealth-building opportunities. Additional deposits could come from public, private, or philanthropic dollars.
- Automatic enrollment of every child ages 18 and younger and any future newborns. A centralized savings plan structure is a proven model for achieving automatic enrollment with seeded accounts.
- Outreach and education to ensure those who need it most are aware of it and can reap the benefits even before they can access the funds.
This blog post was coauthored by experts at the Urban Institute, the Aspen Institute Financial Security Program and the Center for Social Development at Washington University in St. Louis. Combined, the authors have decades of experience studying savings and early wealth-building programs. The authors also all contributed to the initial federal principles for early life wealth-building accounts.
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