Trump Accounts: What Parents Need to Know

Starting on July 4th, 2026, families will have a new option in the kids-savings toolkit: the Trump Account. First, did he really have to put his name on it? Ugh nevermind. I digress. Children born between January 1st, 2025 and December 31st, 2028 are eligible to receive a one-time seed grant of $1,000 from the federal government if the paperwork is filed. Beyond that first $1,000 and for any other child born prior to 1/1/25 and under the age of 18 parents, grandparents, and even employers can chip in to these accounts.

Sounds great on the surface. But like every savings vehicle, there are details that matter when comparing this vehicle with other savings tools.

The Basics

A Trump account is structured as a special type of traditional IRA for children under 18. Created by the One Big Beautiful Bill Act, the rules are:

• Who’s eligible: Any U.S. child under 18 with a Social Security number. Only kids born 2025–2028 get the $1,000 federal seed.
• Contributions: Up to $5,000 per year in aggregate from parents, grandparents, or others (post-tax dollars, not deductible). Employers can contribute up to $2,500 per year of that $5,000 limit. Employer dollars are pre-tax and tax-free to the employee.
• Investments: Locked to low-cost index funds or ETFs tracking the S&P 500 (or a similar primarily-U.S. equity index), with an expense ratio capped at 0.10%. 100% equities, no leverage.
• Withdrawals: Generally no distributions until January 1 of the year the child turns 18. After that, it converts into a traditional IRA and follows standard IRA rules. This includes the 10% early-withdrawal penalty before age 59½ unless an exception applies (first home purchase up to $10,000, qualified education expenses, etc.).
• Taxation: Personal contributions create basis and come out tax-free. Everything else, including the government seed, employer contributions, and all earnings, are taxed as ordinary income on withdrawal.

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