Seven million children have been signed up for Trump Accounts since the July 4, 2026 launch, CNBC reported. Of those, one million have already claimed the $1,000 government seed deposit for newborns, according to the White House.
But a proposal published on August 20 2026, by the Treasury Department and IRS could decide what those families are actually allowed to buy.
Under the proposed rules, an eligible investment must be a mutual fund or ETF tracking a broad U.S. or global equity index with annual fees capped at 0.10%, according to the CPA Practice Advisor.
That effectively rules out individual stocks, bonds, sector funds, and actively managed strategies.
Proposed Treasury rules restrict Trump Accounts to five low-cost index ETFs
The proposed regulations, filed as CC-00349938-26, establish a three-part test for eligible investments.
A fund must track a broad U.S. or global equity index, must not use leverage, and must have annual fees of no more than 0.10% of the fund balance.
The Treasury has selected five ETFs for the Trump Accounts lineup, with the State Street SPDR Portfolio S&P 500 ETF (SPYM), at a 0.02% expense ratio, serving as the launch default.
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The four additional options, each charging 0.03%, are the iShares Core S&P 500 ETF (IVV), the Vanguard Total Stock Market ETF (VTI), the State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM), and the iShares Core S&P Total U.S. Stock Market ETF (ITOT).
If a parent does not select a fund, the trustee automatically invests the account. The 0.10% cap covers fund-level fees only; custodial and advisory fees sit outside that limit, CPA Practice Advisor noted.
Trump Account rules block stocks, bonds, and sector funds during the growth period
Individual stocks, bond funds, and sector ETFs all fail the test, and actively managed funds and leveraged products also fail to qualify.
Custodial and advisory fees are excluded, according to Current Federal Tax Developments. Individual stocks, bond funds, and sector ETFs all fail the test, and actively managed funds and leveraged products also fail to qualify.
What remains is a target-date fund stripped of its bond sleeve, and every dollar stays in equities through childhood.
Treasury says low fees will protect children’s savings over decades
“Every dollar in a child’s Trump Account should be working toward that child’s financial future, not diminished by unnecessary fees,” Treasury Secretary Scott Bessent said in the announcement, CPA Practice Advisor reported.
IRS CEO Frank Bisignano reinforced that argument in the Treasury press release, noting that small annual cost differences can meaningfully change how much a child has in adulthood after decades of compounding.
He said the low-cost index framework is designed to keep more of the investment return inside each account. The fee argument holds up: a fund charging 0.50% instead of 0.02% could eat up thousands of dollars over 18 years.
He also added in the press release that the rules aim to “maximize the share of investment returns that remains in each child’s account.
But low fees and sound asset allocation are two different questions, and Treasury’s proposal only answers one. It does not address whether locking every dollar into equities suits families who would normally shift toward bonds as their child nears adulthood.
Cato Institute analysis calls Trump Accounts the least tax-advantaged savings option
The investment constraints add to a tax structure that has already drawn criticism.
Adam Michel, director of tax policy studies at the Cato Institute, argued in a June 2026 analysis that Trump Accounts are the least tax-advantaged savings vehicle available to families.
Personal contributions go in after-tax, but gains are taxed at ordinary income rates on withdrawal instead of at the lower capital gains rate.
Michel’s modeling showed a single $5,000 contribution invested for 30 years would produce $2,451 less in a Trump Account than in a standard taxable brokerage account, solely because of the less favorable tax treatment on withdrawal.
The account’s real financial edge, he argued, comes from employer contributions, the $1,000 government seed, and nonprofit donations, and not from how it treats family savings.
Treasury has framed the trade-off differently.
Frank Bisignano, IRS CEO, said the guidance rewards patient, cost-conscious investors over the long haul.
These proposed regulations will provide clarity for trustees and beneficiaries of Trump Accounts, thus encouraging eligible participants to invest in low-fee mutual funds and ETFs that will grow on a tax-deferred basis potentially over their entire lives
Bisignano argues that the low-fee structure preserves more of each account’s compound return through adulthood.
Trump Account rules leave families with fewer investment choices
For families deciding where to save, the proposed Trump Account rules sharpen the trade-offs. State-sponsored 529 plans offer broader menus, age-based portfolios that reduce stock exposure as college nears, potential state tax deductions, and tax-free withdrawals for qualified education costs.
A custodial Roth IRA, when a child has earned income, provides tax-free growth and wider fund choice. UGMA and UTMA accounts impose no investment restrictions, though earnings create annual tax liabilities.
Trump Accounts still bring the $1,000 government seed, potential employer contributions, and tax-deferred growth, but families would trade investment flexibility for those perks, leaving the narrowest menu among these options.
