The Trump administration has touted the accounts as a way for American families across all income levels to build wealth for their children. Scroll down the accounts’ website, TrumpAccounts.gov, and you’ll see dollars racking up at the top of your page until you arrive at projections for what the accounts could be worth when holders reach ages 18, 27 and 55. At age 55, absent any other contributions, a child’s initial $1,000 investment could grow to $243,000, according to the site.
These numbers may be too bullish, according to calculations conducted by investment research firm Morningstar exclusively for CNBC. When asked to run similar projections while modeling for factors such as return variability, family income and investor behavior, Morningstar showcases a more subdued picture of financial health for account holders at the same intervals. The model estimates, for instance, that a 55-year-old who received only a one-time $1,000 seed investment could expect their account to grow to $38,000, on average.
Still, the data shows that Trump accounts can be a powerful wealth builder over time, provided investors are prepared for the long haul.
“Intuitively, long-term wealth accumulation is driven primarily by ongoing contributions from families and employers,” said Spencer Look, an associate director of retirement studies at Morningstar.
Also, possibly intuitive: those with more means are even more likely to benefit from the arrangements. Morningstar found that outcomes were significantly better among higher-income Americans, those who are more likely to make substantial contributions and less likely to pull money from the accounts for other expenses.
This “leakage,” as researchers dub account holder withdrawals, is the main reason why, in many of the scenarios simulated by Morningstar, account holders achieve worse results than the projections on TrumpAccounts.gov. In some cases, that leakage leaves those at age 27 and 55 with $0 balances.
Modeling real-world scenarios
To model how the accounts might behave in real life, Morningstar made a few key assumptions. For one, the model only includes contributions to the accounts up to age 18, operating on the premise that, once they reach adulthood, account holders would prioritize more tax-advantaged vehicles such as 401(k)s and individual retirement accounts.
Simulated returns are based on Morningstar’s capital market assumptions for large-company stocks, net of a 0.10% annual investment management fee. Across the range of outcomes, the annualized return ranges from 2.17% (the tenth-percentile outcome for account holders at age 18) to 10.29% (the 90th percentile outcome for 55-year-olds). The arithmetic mean return for the entire study is 9.17%.
Morningstar used retirement account data from Vanguard to map the likelihood that Trump Account holders, who gain control of the accounts at age 18, would pull money from the accounts. The model simulates liquidation at age 18, when account holders could use the money for education expenses, for instance, and at age 30, at which point the cash could be put toward various “adult” goals such as buying a house.
Two major rules of the road emerge from the results.
Contributions make a huge difference
Morningstar’s numbers show that, while the seed money can grow over time, the accounts with meaningful wealth accumulation will be those with consistent contributions, either from families or employers.
By age 18, Morningstar finds that the average account holder who received only the $1,000 seed contribution could expect an account balance of $3,324. Add an annual contribution of $250, and the average amount jumps to $15,154. At $2,500 a year, half the annual maximum, the account grows to $121,632.
Leakage matters
The Trump administration rightly points out that, when contributed to consistently, Trump Accounts can help Americans build wealth over time. But for that to work, the money has to stay in the accounts and grow at compounding rates.
And in the real world, workers — especially those with low and middle incomes — are likely to use the money for different financial goals, Look points out.
“It’s pretty likely a lot of people, especially those you’d want to benefit the most, and would benefit the most, relatively speaking, are going to have a higher chance of having to pull that money — and probably for a good reason.”
The Trump administration said that, regardless of arguments about leakage, the accounts will provide a financial head start to a generation of Americans. “No one is doubting that these are powerful tools to help everyday Americans save for retirement,” White House spokesman Kush Desai told CNBC.
Nevertheless, leakage can have a major impact on whether a Trump Account is a vehicle for long-term wealth. In Morningstar’s study, a 55-year-old who received $1,000 annual contributions could expect an average balance of nearly $850,000. But in the bottom 25% of the projected scenarios at that contribution level, accounts show a $0 balance. That’s not because the market tanked in these simulations.
Rather, those with lower incomes and who earn lower returns are much likelier in Morningstar’s simulation to clean their accounts out, using the cash to buy a car, pay for an education or just make ends meet.
Maximizing accounts, managing expectations
The results come with two clear takeaways for parents hoping to boost their children’s long-term wealth. One is that, upping your contributions can make an enormous difference on your child’s future wealth.
Some households will have an easier time contributing than others. In 2024, the U.S. median household income was roughly $84,000, according to the U.S. Census Bureau. A maximum $5,000 annual Trump account contribution represents roughly 6% of that.
But even a $1,000 annual contribution makes a meaningful impact. By the time a child reaches 18, and the account becomes theirs to manage, Morningstar projects a child could reach more than $50,000 at that level.
That amount “feels huge” to an 18-year-old, said Doug Boneparth, a certified financial planner and founder of Bone Fide Wealth. For that reason, he said, it will be essential to communicate with your child about the accounts’ long-term potential.
That will be easier said than done, he adds. To an 18-year-old, $50,000 could mean a new car or two years of rent in a nice apartment. But Boneparth explains that you can use projections like Morningstar’s to make the case against leakage and for holding over the long term.
“‘That $50,000 in your account? If you leave it alone, there’s a realistic path to $500,000 or more by the time you’re 55.'” Boneparth suggests as a possible script. “‘If you spend it, you’re not spending $50,000, you’re spending half a million dollars.'”
