Aug 12, 2025
Trump accounts are a new type of tax-advantaged savings account that were signed into law through the One Big Beautiful Bill Act. These accounts create a new way for parents to save for their child’s future. They work by combining an initial $1,000 federal contribution with optional ongoing deposits from parents or employers, which are then invested in approved mutual funds — a setup some critics see as a small-scale version of privately managed retirement accounts.
While having a new way to save for a child’s future might generally sound like a positive initiative, Treasury Secretary Scott Bessent’s recent comments have stoked fears that the Trump accounts represent a Trojan horse for Social Security privatization.
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"[I]n a way, it is a backdoor for privatizing Social Security," Bessent said of the accounts at an event hosted by Breitbart in July.
Since the event, Bessent has walked back his comments. But questions remain.
Are Trump accounts a ‘backdoor’ way to privatize Social Security?
When people talk about privatizing Social Security, the idea generally refers to shifting part or all of the program’s guaranteed government benefits into individually managed investment accounts. Opponents argue that this exposes retirement savings to market volatility, reduces the reliability of benefits, and undermines the social safety net millions of Americans rely on.
After swift backlash about the possibility of privatizing Social Security, Bessent quickly clarified his stance in a post on X, writing, “Trump Baby Accounts are an additive benefit for future generations, which will supplement the sanctity of Social Security’s guaranteed payments… [O]ur Administration is committed to protecting Social Security and to making sure seniors have more money.”
In the case of Trump accounts, the seed money comes from public funds, but any additional growth depends on private contributions and market performance. This hybrid model blurs the line between government-backed benefits and individually managed investments.
Critics worry this shift toward mixing private and public funds, as will happen within the Trump accounts, marks the beginning of an effort to privatize Social Security. And it’s not the first time that rumors of privatizing Social Security have milled about.
Back in the George W. Bush Administration, a commission digging into Social Security suggested creating individual accounts in which a portion of the benefits would be invested into the stock market. But this never came to pass.
Other recent actions have put the Social Security Administration in a tough position. Staffing cuts have pushed the agency to operate on a skeletal crew, which will likely lead to a strain. Some are concerned that growing pressure on the agency will eventually lead to an outsourcing of the agency’s responsibilities, which could eventually evolve into privatization.
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For now, speculation on Social Security privatization seems to be just that: speculation.
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Could Trump accounts reshape retirement planning?
Parents of children born during 2025 through 2028 can open a Trump account, which starts off with a $1,000 contribution from the federal government. From there, either the parents’ employer or the parents themselves can contribute several thousand dollars per year. The catch is that the funds must be invested in an approved mutual fund.
Account beneficiaries cannot tap into the account until age 18. But even then, only approved purchases, like college tuition and first-time home purchases, allow for a penalty-fee withdrawal before age 59.5.
So, what does this mean for retirement? Right now, it doesn’t impact too much. Current seniors won’t benefit from Trump accounts, and the newborns currently eligible for the Trump accounts won’t reach retirement age for several decades.
In theory, the funds deposited could grow to help the child tackle significant financial goals or even pay for part of a distant retirement. In reality, account balances will vary significantly based on how much parents or employers contribute.
For example, let’s say that a child’s Trump account receives $1,000 in seed money and grows at a 7% annual rate. After 18 years, the account will hold around $3,380. If they never touch the funds, the account would eventually hold around $81,272 after 65 years of growth. While having this money is better than having nothing, it’s unlikely these sums would support a comfortable retirement.
Trump accounts were signed into law in July, and parents of any child under the age of eight can open a Trump Account starting in 2026. It’s likely that popular banks and brokerage platforms will be involved in making these accounts a reality for families.
Whether they become a stepping stone toward Social Security privatization or remain a separate, supplemental program will depend on how they’re implemented and how future administrations choose to build on them.
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Sarah Sharkey is a personal finance writer who enjoys helping people make optimal financial decisions for their situation. She loves digging into the nitty-gritty details of financial products and money management strategies to root out the good, the bad, and the ugly. Her goal is to help readers find the best course of action for their needs.
