Elijah Nicholson-Messmer at Barron's questioned the return projections behind the new Trump accounts, and asked me about the number families are being shown. The official site projects that a saver contributing $5,000 a year for 18 years reaches about $271,000. In today's dollars, that same balance is worth roughly $100,000 less.
The nominal figure is not wrong. It is just not what the money will actually buy when the tuition bill arrives. A projection that ignores inflation is not a plan. It is a guess.
I shared a client story with Barron's. Last year a client showed me her daughter's college projection from her brokerage. It looked great. It was also in nominal dollars with no inflation adjustment. We sat down and ran the real-dollar version together, and the number dropped enough that we had to rework her monthly contribution. Better to find that out at year three than year 17.
This is not unique to Trump accounts. Almost every long-horizon projection you will see is shown in nominal dollars because the chart looks better that way. Purchasing power tells a quieter story.
When you look at any goal 15 or 18 years out, ask one question before you commit to a contribution amount: is this number in today's dollars, or in future dollars I will not be able to spend the same way?
Read the full article at Barron's →
