US Treasury finalises fund lineup for Trump Accounts

The US Treasury Department has released new guidance for "Trump Accounts," tax-advantaged savings vehicles designed for children under the age of 18. The department confirmed that the State Street SPDR Portfolio S&P 500 ETF (SPYM) will serve as the default fund for these accounts, a decision first indicated in July. This selection is intended to keep costs low while promoting broad diversification for long-term growth.

In addition to the default fund, the Treasury approved four alternative low-cost index ETFs for account holders. These include the iShares Core S&P 500 ETF (IVV), the Vanguard Total Stock Market ETF (VTI), the SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM), and the iShares Core U.S. Aggregate Stock Market ETF (ITOT). The guidance explicitly limits account choices to funds with low expense ratios, excluding products with excessive fees or unnecessarily complex strategies.

All five selected funds carry expense ratios ranging from 0.02% to 0.03%. The Treasury argues that these minimal fees will allow investment returns to compound more effectively over time, ensuring that a larger portion of the savings remains with the account holder rather than being consumed by management costs. The funds provide exposure to between 500 and 2,500 holdings, with the technology sector representing the heaviest category across all five options.

Robinhood has been named the official brokerage partner and initial trustee for the scheme. Under the new rules, Trump Accounts will automatically convert into traditional IRAs hosted on the Robinhood app once the child turns 18. The platform will manage the transition of the savings vehicle from a custodial account for minors to a standard individual retirement account.

The accounts are funded through a combination of a one-time, tax-free $1,000 federal seed grant, annual contributions from family and friends capped at $5,000, and employer matches limited to $2,500 per year. Qualified private donors may also contribute. Accounts can be opened for a child from birth until their 18th birthday.

According to projections from the Congressional Budget Office, the federal contribution of $1,000 per child will total approximately $13.8 billion by December 31, 2028, assuming all eligible parents elect to receive the grant. Given the low fee structure of the selected funds, this could translate into significant savings on management costs over the life of the accounts.