As parents, we want to do everything in our power to set our kids up for success. A Trump Account is a new savings option created under the One Big Beautiful Bill Act (OBBBA) designed to help children born between December 31, 2024, and January 1, 2029, start saving early.
Here’s a simple breakdown to help you decide if a Trump Account makes sense for your family.
What is a Trump Account?
This is a new savings account created under the OBBBA, signed on July 4, 2025.
Here’s a quick summary of what you need to know
- You can set up a Trump Account for a child born after December 31, 2024, and before January 1, 2029.
- The government seeds it with $1,000 (which doesn’t count against the annual contribution limit).
- After that, parents/guardians (or other individuals) can contribute up to $5,000 a year
- Employers also can contribute up to $2,500 per year for an eligible dependent, and that doesn’t count as taxable income for the employee.
- Funds are invested in a low-cost, index-style vehicle (mutual fund or ETF tracking a US stock index) with strict rules (fees ≤ 0.1 %).
Why a Trump Account is worth looking into
If used wisely, a Trump Account takes advantage of compounded growth, thanks to an early start on your savings. In addition, the $1,000 seed from the government is worth taking for any eligible child.
Let’s look at an example: Suppose you open one of these for a baby born in 2026, and you max out contributions every year until age 18 (in 2044). According to estimates from the Congressional Economic Affairs Institute (CEA) under average returns, that account could grow to ~$303,800 by age 18, and ~$1,091,900 by age 28.
If you make no contributions other than the $1,000 provided by the government, it’s still ~$5,800 by age 18 and ~$18,100 by age 28. (These numbers assume you hit the maximum each year.)
Where you need to check the fine print
Of course, there are a few limitations that apply:
- The contribution limit: You can’t simply add any amount each year; there’s a cap of $5,000 from individuals and employer contributions until the child turns 18.
- What happens at age 18: At that point, the Trump Account will be treated like a traditional IRA, meaning the child needs earned compensation to contribute further, and the usual IRA rules apply.
- Distributions: You cannot access the funds (generally) until age 18. After that, early withdrawals (before age 59½) from the IRA portion may trigger a 10% penalty, unless an exception applies.
- Tax treatment: Contributions from you (parents/guardians) are made with after‐tax dollars (no deduction). But contributions from an employer, from the $1,000 government seed, or from certain charities do not build a basis (i.e., they will be taxable when withdrawn), and earnings are taxable when withdrawn.
How does a Trump Account compare with other investment vehicles?
For many families, a different vehicle (for example, a 529 plan for education) may offer clearer tax advantages depending on your goals. The tax-advantaged portion of a Trump Account is arguably more limited.
It’s also worth noting that a Trump Account can favor families with more means. Because the benefit of maxing contributions requires real disposable income, critics argue it may widen, rather than narrow, the wealth gap.
Is a Trump Account a good fit for you and your family?
Ask yourself these questions:
What is your goal for this money?
Is it for college? A first home downpayment? For retirement? The Trump Account is flexible, but you may get more tax bang from a vehicle tied to a specific goal (like education), depending on your state and tax situation.
How much can you reasonably contribute each year?
If you can afford to contribute several thousand annually and want long-term growth, the Trump Account makes sense. If you can only contribute a few hundred, perhaps prioritize other vehicles.
What other savings are already in place?
If you’re saving for the child’s education via a 529, or the parent already has a Roth IRA, you might layer the Trump Account into your overall plan rather than rely on it alone.
Are you comfortable with the restrictions?
Since the funds become a traditional IRA at 18, and early withdrawals carry penalties, you must be willing to let this money sit for the long haul (unless certain exceptions apply).
Will you track the tax details?
Because the tax treatment depends on the source of contributions (parent vs employer vs government seed), you need to maintain records of basis, contributions, etc.
You may also be interested in: A Beginner’s Guide to Tax-Efficient Investing
How to set up a Trump Account
Custodians can begin opening Trump Accounts after July 4, 2026. The law imposes that date as the earliest contribution date.
- Set up the account for your eligible child (with SSN, born in the specified window).
- Get the $1,000 government seed (you’ll want to check the IRS requirements).
- Decide how much your family can contribute annually (e.g., $1,000, $2,000, or up to $5,000 if feasible) and set that up. If your employer is willing, check their contribution option (up to $2,500) for children of employees.
- Choose the investment: since the law restricts investment to index-tracking funds with fees ≤0.1 %, pick one of the approved funds.
- Keep records of contributions (who made them, from what source), when they were made, basis amounts, etc.
- Monitor annually to make sure you don’t exceed contribution limits, watch for regulatory guidance from the IRS, and track whether other savings priorities need re-adjusting.
- Revisit the vehicle as the child approaches age 18. You may want to review whether to let it roll as an IRA or modify your strategy (for example, converting to a Roth IRA if eligible).
Does a Trump Account make sense for you?
If you and your family are in a position to contribute meaningfully and are comfortable with the long-term horizon, a Trump Savings Account could be a strong option. If your priority is shorter-term (education rather than retirement), or you have limited contribution capacity, you’ll want to compare it with alternatives (529, custodial brokerage, Roth IRA) before committing.
If you’d like to assess whether a Trump Account makes sense for your family and how it stacks up vs. your 529, Roth, and education savings, let’s schedule a strategy session. We’ll model your scenarios, look at contribution capacity, tax impact, and design the setup.