Trump accounts expand to nearly 70M kids as stock proposal draws questions

• What’s at stake: Trump accounts just expanded dramatically in number, now with nearly 70 million, thanks to an auto-enrollment effort. A new proposal would also expand ways to fund the accounts, allowing for stock contributions.
• Supporting data: Treasury officials confirmed that prior to the auto-enrollment of more than 60 million children this month, 7 million had opted in to the Section 530A accounts. 
• Expert quote: “Automatic enrolling gets more people invested earlier, and when you’re talking about children, that potentially creates decades of additional compounding.” — AJ Kletkin of Private Advisor Group

The Trump administration announced on Oct. 7 the auto-enrollment of more than 60 million children in Section 530A accounts, or Trump accounts, bringing the total number of accounts to nearly 70 million.

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The move marks a major step in the still-evolving savings program, which is intended to help children build assets before adulthood. At the same time, regulators are seeking public comment on a proposal that would allow donors to contribute individual stocks to groups of at least 5,000 children in a qualified state or geographic area — creating a new, if unusual, charitable giving option. 

Advisors said the changes could create new planning conversations about saving for children and charitable giving, despite key details of the accounts remaining in flux.

Auto-enrollment for kids helps with early compounding

Trump accounts are a type of tax-advantaged individual savings account for children who gain access to them at age 18. The automatic enrollment effort has significantly expanded the program. Nearly 70 million children now have Trump accounts, whereas about 7 million did before the automatic enrollment, according to a Treasury official. 

Auto-enrollment creates accounts for children under 18 with valid Social Security numbers without requiring parents or guardians to open them first, though parents must claim the accounts to manage them and allow for qualifying contributions.

The automatic enrollment in Trump accounts differs from auto-enrollment in defined contribution plans, such as 401(k) retirement plans, because the account itself is created automatically rather than contributions being made automatically, though both are aimed at prompting investors to save.

“For people that are just not into this stuff or don’t even know about it, at least … the kids will have an account automatically enrolled,” said Adam Bergman, founder of Sioux Falls, South Dakota-based IRA Financial, which specializes in self-directed retirement accounts.

AJ Kletkin, a New York City-based private wealth advisor at Private Advisor Group, said that automatic enrollment will encourage saving.

Time and participation are the biggest benefits, he said. “Automatic enrolling gets more people invested earlier, and when you’re talking about children, that potentially creates decades of additional compounding.”

Stock contributions and donations to Trump accounts

Currently, certain low-cost index funds are the investment options for Trump accounts. But a Sept. 30 rule proposed by the IRS and the U.S. Treasury Department would establish a method for donating individual stocks to groups of at least 5,000 children in a qualified state or geographic area. 

This donation method could give companies or other donors a new way of offloading appreciated stock while avoiding capital gains taxes. It could be an additional method to use appreciated stock for charitable purposes.

The agencies are seeking public comments through Nov. 30 on the proposal. Generally, the account holders must keep the donated stock for at least five years.

“That’s kind of unique that you don’t have the ability to diversify that,” said Brian Boswell, co-founder and senior wealth advisor at Georgetown, Texas-based The Retirement Studio, which is affiliated with registered investment advisor Savvy Advisors.

He speculated that the provision could be a way to reduce the risk of widespread selling immediately after shares are distributed. 

“Maybe if everybody sold it on the same day … it could adversely impact the stock,” he said, while noting that could still happen after the five-year hold. 

The proposed stock-donation mechanism has also drawn some skepticism.

“What on earth. These accounts got very weird very quickly,” wrote Christine Benz, director of personal finance and retirement planning for Morningstar, in an X post. “If you ask me if kids are better off owning an S&P 500 index fund or some shares of a random company that they or their parents can’t choose (and even if they could…), I’m going to stick my neck out and say the index fund is the better bet.”

From the perspective of a donor, Trump accounts are an option to consider, though questions remain about how stock donations would be administered at scale.

A limited number of people are likely to consider making contributions to Trump accounts, said Bergman, who put the maximum at hundreds of Americans.

Joseph Medina, Washington-based partner in EY Private, said his understanding is Treasury will keep “one big omnibus account” and, as individuals claim them, separate the pieces.