Trump accounts bring US$1,000 federal seeds and a US$6.25 billion pledge
A child born in 2026 could have more than US$1m by age 28 in a “Trump account” if their family maxes contributions and markets cooperate — a structure that looks a lot like a hybrid of a TFSA and RESP, but with US quirks Canadian advisors need to understand.
Michael and Susan Dell have pledged US$6.25bn to fund “Trump accounts” for about 25 million US children, on top of a planned US$1,000 federal seed deposit for eligible kids, according to Financial Post.
These accounts sit inside US President Donald Trump’s One Big Beautiful Bill and will roll out starting in 2026.
Trump accounts are tax‑deferred investment vehicles for US children, designed to start saving from birth and let compounding work over decades.
Parents or guardians must open and manage the accounts until age 18, according to both outlets.
The US government plans a one‑time US$1,000 contribution for children who are US citizens and born between January 1, 2025 and December 31, 2028, according to CBS.
Families can also open accounts for other children under 18, but those accounts will not receive the US$1,000 gift.
Any US child under 18 with a Social Security number can have a Trump account, but it remains under parental or guardian control until 18, as per Financial Post.
From 2026, parents and others can contribute up to US$5,000 per child per year, while employers can add up to US$2,500 annually tax‑free, with employer amounts counting toward the US$5,000 cap.
Foundations, cities, states, tribal governments and other tax‑exempt entities can contribute outside that cap.
The US Treasury and Internal Revenue Service will index contribution limits to inflation after 2027.
Investments face strict rules.
Money must go into diversified, low‑cost funds tracking US companies, such as S&P 500 index products, reported Financial Post.
CBS added that funds must be in approved mutual funds or ETFs that track the S&P 500 or similar US equity indices, and that managers cannot charge more than 0.1 percent per year in fees.
Once the beneficiary turns 18, a Trump account follows traditional individual retirement account (IRA) rules, including a 10 percent additional tax on most withdrawals before age 59½ unless an exception applies, such as higher‑education costs or a first‑home purchase, according White House comments cited.
Before age 18, withdrawals are essentially locked, except in narrow cases such as rollovers or death.
Jamie Golombek, managing director, tax and estate planning at CIBC Private Wealth Management, said the idea is that a Trump account “grows on a tax‑deferred basis, and then when the kids take the money out, sometime after age 18, the contributions will come out tax‑free,” according to Financial Post.
He noted that parental contributions will not be taxed when withdrawn, but earnings will be taxable, and that federal seed money plus employer and charitable deposits are treated as earnings and taxed on withdrawal as well.
The US Council of Economic Advisers estimates that, assuming average stock‑market returns and maximum contributions, a child born in 2026 could have about US$303,800 at 18 and US$1,091,900 at 28 in a Trump account.
With only the initial US$1,000 and no further contributions, those figures fall to US$5,800 at 18 and US$18,100 at 28.
Pierre‑Benoît Gauthier, vice‑president of investment strategy at IG Wealth Management, said the main advantage is starting early. He told the Financial Post that when you start investing at birth, compounding does the heavy lifting.
Functionally, Trump accounts appear to be multi‑purpose: beneficiaries can use funds for education, a first‑home down payment, capital to start a business, or keep them invested for retirement.
CBS similarly noted that adults can use Trump account money beyond education, and that the accounts can operate as a form of IRA.
From a Canadian standpoint, Golombek said a Trump account is most comparable to a tax‑free savings account because contributions are made with after‑tax dollars and grow on a tax‑advantaged basis, although TFSA withdrawals are tax‑free while Trump account earnings are taxed on withdrawal, according to Financial Post.
He suggested that, if Canada ever wanted a similar program, existing structures could be adjusted — for example, by lowering the TFSA contribution age and allowing third‑party contributions for minors — rather than creating a new vehicle.
Gauthier compared Trump accounts to a mix of a TFSA and a registered education savings plan because an RESP is opened on behalf of a child and receives government contributions.
Golombek noted that RESP contributions are made with after‑tax dollars and are not taxed when withdrawn, but investment earnings inside a RESP are taxable on withdrawal, similar to Trump accounts.
The federal 20 percent RESP match, up to $500 per year, could be more attractive than a single US$1,000 deposit, Gauthier said, with the caveat that RESPs are mainly for post‑secondary education and carry tax implications if used for other purposes.
On equity and uptake, Gauthier told Financial Post that although Trump accounts are marketed as benefiting all newborn American children, he and other observers worry they will be used most by higher‑income households that can afford to contribute the full US$5,000 annually.
At the same time, he said “these accounts might help lower-income families build a small nest egg for their children, which is positive.”
