The Tricks and Traps of Trump Accounts

By now, you may have heard of Trump Accounts: a new individual savings vehicle that President Donald Trump concocted that is currently available to all American citizens under age 18. Regardless of how you feel about the name attached, or under what beautiful bill it was enshrined into law, it’s an idea that has some merit. The accounts could even be a reasonable new retirement option within an inefficient, regressive, individualized, and bipartisan U.S. retirement savings system.

But as with all things Trump—buyer beware. There is one key question that remains unanswered, and that is whether the Wall Street–friendly administration will do anything to limit fees that administrators can levy on potential customers. This question will determine whether the program will be an incremental, rational improvement to a flawed system or a Wall Street fee machine that predates working-class savings.

But first, a bit more about how the accounts will work. Any parent or guardian of a U.S. citizen under the age of 18 can sign up for Trump Accounts right now on their 2025 taxes.

The accounts will function similar to IRAs, with a few important exceptions. The funds cannot be touched for 18 years for any reason except the death of the child beneficiary, and all assets in the accounts must be invested in relatively low-fee index funds with at least a majority of the stocks in U.S. companies. Anyone can contribute an additional $5,000 annually to an account, including employers who can give up to $2,500 annually.

Once the beneficiary turns 18, a Trump Account can be affirmatively converted to a traditional IRA, which has its own rules for penalty-free withdrawals.

As an added incentive, the Department of Treasury will place $1,000 into any newborn’s Trump Account born last year through 2028. Over the past few months, myriad Wall Street titans—including Michael Dell of Dell Technologies; Ray Dalio, founder of the world’s largest hedge fund; and Nicki Minaj, founder of the Barbz digital army—have pledged additional donations to various classes of American beneficiaries.

Brad Gerstner, chair and co-founder of Invest America, a nonprofit that has been consulting the Treasury on the accounts, pledged to give, as well. Gerstner also helms a hedge fund with the same Silicon Valley address as Invest America, according to nonprofit disclosures.

Invest America was the one that recruited Michael Dell to donate, according to Matt Lira, co-founder of the nonprofit. Invest America has also consulted with dozens of large employers on how to make matching contributions for their employees’ children.

At least since the Super Bowl commercial, over two million citizens have signed up for Trump Accounts, which are set to go live July 5.

But here’s where Wall Street fees could become a fait accompli. Once a family gets a Trump Account, the account will be held at the U.S. Treasury with a Wall Street firm handling back-office administration. However, the December proposed regulation also allows Trump Accounts to be “rolled over” to a different financial institution.

After months of speculation, Robinhood has been selected as the default administrator, according to Scott Colangelo, chairman and managing partner of Prime Capital Financial, a wealth management firm. Colangelo spoke with sources close to the deal, and Robinhood beat out at least one other major brokerage, Charles Schwab. Both brokerages pledged to match employee contributions to their children’s Trump Accounts.

Robinhood will partner with the National Design Studio, a Trump-created executive office, to create a “custom, white-label” app for the Trump Accounts, according to a Treasury Department announcement Monday. BNY will also help manage the initial accounts and design the app, the press release said.

In general, administrators would manage the Trump Account logistics, while asset managers would govern the index funds in the accounts. BNY is set to be the asset manager of the default index funds, according to a source familiar with the negotiations.

Spokespersons for Robinhood and BNY did not respond to requests for comment. A spokesperson for Schwab declined to comment.

The One Big Beautiful Bill Act, or OBBBA, mandates that index funds have a defined fee cap of 0.1 percent of the account assets in the index funds, but there is nothing in the law or proposed Treasury regulations capping administrative fees.

The OBBBA empowers the treasury secretary to choose the default administrator based on, among other things, “the costs imposed by the trustee on the account or the account beneficiary.” And Treasury has been negotiating with Robinhood to keep administrative fees low, Colangelo said.

But without formal rules, the government has no control over fees once the Trump Accounts are rolled over; nor does it have any power to limit charges imposed on the rollover itself. Moreover, the Securities Industry and Financial Markets Association, or SIFMA, a powerful Wall Street lobbyist, wrote in a January comment letter that Treasury should specify that fees of all kinds can be levied on top of the OBBBA-limited index fund fees.

In similar types of accounts, administrative fees and commissions can be misleading, complex—and hidden. 529 plans, which are education-specific individual savings plans, can layer on monthly or quarterly flat maintenance fees, annual maintenance fees, enrollment fees, sales commissions, or administrative fees determined as a percentage of the plan’s assets. Index funds change their fees depending on the vehicle that they’re in, as well.

These fees can cut dramatically into account growth, particularly for smaller accounts. If an administrator were to charge a flat $25 annual administrative fee, for example, that could eat into 2.5 percent of growth on a $1,000 Trump Account. Meaning that if the fund only grows 3 percent annually, after the index fund’s fee, the administrator could take almost all of its growth.

IRA fees are so unregulated that employers cannot contribute to them in a compensation package, Teresa Ghilarducci, an economics professor at the New School, wrote in her 2024 book, Work Retire Repeat: The Uncertainty of Retirement in the New Economy.

But Brad Campbell, a partner at Faegre Drinker Biddle & Reath, a K Street law firm, argued that competition for Trump Accounts will help keep fees low.

Administrators aren’t angling to make a lot of money off of these accounts, but instead see them as a chance to build relationships with potential future clients, Lira said. Invest America backs some limits on administrative fees, but the nonprofit won’t take a position on where the fee cap should be or whether it should be mandatory.

On Invest America’s website, Gerstner claims to have come up with the idea for Trump Accounts in 2020, but individual child savings accounts have been around at least since President Bill Clinton floated Universal Savings Accounts, or USAs, in 1999. In 2018, Cory Booker introduced a similar “Baby Bonds” idea that undergirded his failed 2020 presidential campaign. Gerstner did not respond to requests for comment for this story.

Trump Accounts will expose millions of Americans to the stock market for the ostensible purpose of achieving a two-part goal: Create wealth for millions of Americans, and increase “financial literacy.” Trump Accounts could end up being a perfectly rational, individual savings vehicle, in line with many other perfectly rational, individual savings vehicles. It is possible to behave rationally in an irrational system.

That said, America’s irrational, individualized plan system has not helped with financial literacy, and it has led to worse outcomes than pooled vehicle systems. Because individual plans are small fish in a big pond, they have no negotiating power to lower fees. “Workers end up with an inferior, low-performing, and suboptimal account, paying high fees on amateur investment portfolios,” wrote Ghilarducci in 2024. Pooled pensions, in contrast, pay wholesale prices on investments, operate centrally, and their pooled risk opens them up to (potentially) higher-growth investments in the unregistered markets.

In the five decades when mostly union pensions were supplanted by individual workplace plans like 401(k)s, income and wealth inequality has skyrocketed to its worst in American history.

Two reforms passed under Trump 1.0 and Biden have created incremental improvements, including an underutilized pooling option, but the fundamental premise of individualized retirement needs systemic reform.

The reality is that wealthy people much more frequently use individualized retirement vehicles. But poor and working-class Americans aren’t using these vehicles because they lack “financial literacy.” They are not saving because they lack savings: Two-thirds of Americans say they are living paycheck to paycheck, according to a 2025 PNC Bank survey.

While there is nothing wrong with learning about economics and finance at all (thanks for reading), financial literacy should not be a prerequisite to a dignified retirement. The idea that financial illiteracy is why working people cannot save enough for retirement should be treated for what it is: insult added to the injury of an unjust system.

Trump Accounts’ claims to help with financial literacy are particularly ironic, considering account trustees cannot even touch them for 18 years, much less diversify or pool them, both of which would be financially rational things to do.

There are better models for Trump Accounts. Connecticut recently created a pooled investment vehicle for its children that is managed by the elected state treasurer. The pooled vehicle model “helps spread out the risk and administrative management fees, simplifies program management, and ... it prevents another third party from getting their hands on it,” explained David Radcliffe, an associate professor at the New School who helped craft the legislation.

It should be noted that the Connecticut law includes a financial literacy program. Further, the Connecticut model is means-tested to Medicaid recipients, which means there is a benefits cliff.

We should also examine past returns. Imagine a financial savings program passed by an all-Republican government managed by private financiers with little legal oversight. The assets aren’t pooled, the savings aren’t guaranteed, and the investments that undergird them must be low-risk. The new program is designed to both create wealth and increase financial literacy.

That may describe Trump Accounts, but it also describes the Freedman’s Bank, the bank created by Congress in 1865 to serve formerly enslaved African Americans. Justene Hill Edwards’s book, Savings and Trust: The Rise and Betrayal of the Freedman’s Bank, details how the bank’s mostly white and wealthy trustees embezzled millions from the bank’s $57 million in deposits, forcing its closure after only nine years. Most newly freed slaves lost the majority of their savings, and much of the trustees’ “loans” were never repaid, much less with interest.

I bring Freedman’s Bank up not to directly compare it to Trump Accounts (for one, banks operate with leverage, and Trump Accounts cannot), but to note that none of these goals are new. The Trump administration should also remember how important it is to have sound oversight of private administration of public programs. The road to embezzlement is paved with good, unregulated intentions, and so far, good intentions are the only thing reining in the Trump Account fees that might cut into the promised proceeds of millions of customers looking for a way to save for their future.