A 0.65% Fee Costs a Trump Account $2,300 Over 18 Years. Is Yours Paying It?

Seven million children already have a Trump Account. One million of those families have claimed the $1,000 the federal government puts into every account for a child born between 2025 and 2028. Almost none of them have answered the second question: what is that $1,000 actually invested in?

On August 20, the Treasury Department and the IRS answered it for everyone. A Trump Account can now only hold a fund that tracks a broad U.S. or global stock index, uses no leverage, and charges no more than 0.10% a year — about a dollar a year for every $1,000 sitting in the account. A sector fund, an actively managed strategy, a single stock: all of it is off the table now, by law, not by choice.

That's a regulation most parents will never read, governing money already sitting in seven million accounts. It's worth thirty seconds to understand what it's protecting your child's account from, because the dollar cost of getting this wrong — before the rule existed — was real, and it's a number nobody else has run.

What the IRS Actually Locked In on August 20

A Trump Account is a new, tax-deferred account for a child, created under the Working Families Tax Cuts and open for real contributions since July 2026. Parents, grandparents, employers, or anyone else can put in up to $5,000 combined per year through 2027, after which the cap adjusts for inflation. That $1,000 seed arrives automatically once a parent makes a one-time election with the IRS — no extra paperwork about picking a fund is required to claim it. The money itself is locked up: the account enters what the regulation calls a "growth period," running from the day it opens until December 31 of the year the child turns 17. No withdrawals happen before then.

Every dollar inside that growth period now has to sit in a fund that clears three tests: it tracks a broad index like the S&P 500, it carries no leverage, and its total costs — the expense ratio plus any sales load or redemption charge — stay under 0.10% of the balance. If a parent never picks a fund, the trustee defaults to one automatically; right now that default is the State Street SPDR Portfolio S&P 500 ETF. Treasury Secretary Scott Bessent put the reasoning plainly: "every dollar in a child's Trump Account should be working toward that child's financial future, not diminished by unnecessary fees."

That's not a bad default to force on families in the first place. The S&P 500 remains one of the hardest benchmarks to beat over any real stretch of time, and a broad index fund is exactly where a portfolio belongs when there's doubt about what else to pick.

What $1,000 and a Real Contribution Habit Actually Build by 18

Run the math on three parents, all of whom claim the $1,000 federal seed the day their child is born, and all of whom invest it — and everything they add — in a compliant index fund earning a conservative 7% average annual return, the long-run historical return for a broad U.S. stock index, before the 0.10% fee. The Compound Interest Calculator runs this exact math for any contribution amount you plug in. Here's where each parent lands at age 18:

Every parent who already opened a Trump Account is somewhere on that table right now, whether they've run the numbers or not. The middle row is realistic for most families — a manageable $100 a month, invested from birth, compliant with the new rule automatically because the trustee already picked a fund that qualifies. Plug your own monthly number into the Compound Interest Calculator and see which line you're actually on; most people sit closer to the top row than they'd like, simply because they haven't added anything past the initial $1,000.

The 0.55-Point Gap the Rule Was Written to Close

Here's what the fee cap is actually worth. Before this rule, nothing stopped a Trump Account from sitting in a fund charging what the fund industry charges on average — 0.65% a year for an actively managed mutual fund, versus 0.05% for a plain index fund, according to Investment Company Institute data reported by NerdWallet. That's a 0.60-point gap in raw fees, or roughly 0.55 points once you net the new 0.10% cap against the higher figure.

Run that gap through the $100-a-month scenario from above:

That's a $2,300 gap, on ordinary contributions, produced by a fee difference of just over half a percentage point compounding quietly for eighteen years. None of the coverage of this regulation ran that comparison — the IRS's own proposal doesn't include a single dollar example. The number matters because it's the exact cost the rule now makes illegal inside a Trump Account. You don't have to do anything to get the benefit: if your account holds any fund at all today, it's already compliant, because nothing else was legally allowed to be sold into one.

What That Balance Buys the Year Your Kid Turns 18

Nominal dollars eighteen years out don't spend like today's dollars. At a realistic recent average of 3% annual inflation, that $44,180 balance loses real purchasing power every year it isn't adjusted for. Run it through the Inflation Calculator and the number comes back close to $26,000 in today's spending power — still real money for a first car, a trade-school program, or a chunk of tuition, but a meaningfully smaller number than the one that will show up on a brokerage statement.

That gap is exactly what the Inflation Calculator is built to show: run the account's projected future balance through it at a few different inflation assumptions, and see what it actually buys the year your child turns 18, instead of anchoring on the nominal figure sitting on a screen.

Check What Your Trustee Already Picked for You

The rule is still technically a proposal — the IRS is taking public comment through October 20, 2026, before finalizing it. But the fee cap, the index-only requirement, and the no-leverage rule are already the effective standard for every fund a trustee can sell into a Trump Account, comment period or not.

If you claimed the $1,000 and never selected a fund, you're already in the compliant default — the rule made sure of that. What you haven't decided yet is whether $100 a month, or something closer to the $5,000 maximum, is the number that actually matches what you want this account to become.