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Recent federal legislation introduced a new savings vehicle for children known as a Trump Account. As with any new planning opportunity, understanding how the account works is more important than the name attached to it.

The more important question for families is simple: What is it, and does it make sense for your situation?

Trump Account Quick Facts

• Eligible children may receive a one-time $1,000 government contribution
• Annual contribution limit of $5,000, subject to future inflation adjustments
• Owned by the child and managed by a parent or guardian until age 18
• No earned income is required to contribute
• Investments are limited to low-cost U.S. stock market index funds and ETFs
• Designed to encourage long-term saving and investing

What Is a Trump Account?

A Trump Account is a custodial investment account established for children under age 18. The account belongs to the child but is managed by a parent or guardian until adulthood.

Think of it as a long-term investment account designed to help children get an early start building wealth. Unlike a Roth IRA or Traditional IRA, contributions can be made even if the child does not have earned income.

Withdrawals generally are not permitted while the child is a minor. Once the child reaches age 18, they assume control of the account and it begins functioning much like a Traditional IRA. 

Tax Treatment

• Personal Contributions: Made with after-tax dollars and are withdrawn completely tax-free.
• Growth & Seed Money: All accumulated investment growth, the initial $1,000 government seed, and any pre-tax employer contributions are subject to ordinary income tax upon distribution.
• Early Withdrawals: Withdrawals taken before age 59½ may face an additional 10% penalty unless a qualified exception applies, such as a first-time home purchase or higher education expenses.

Government Contribution & Eligibility

One of the most notable features of the program is the one-time $1,000 government contribution.

To qualify, a child generally must:

• Be a U.S. citizen
• Have a valid Social Security number
• Be born between January 1, 2025, and December 31, 2028

Children born outside of this period can still open and contribute to a Trump Account but will not receive the government contribution.

Contributions & Investments

The annual contribution limit is currently $5,000 per child (from all sources). Contributions may come from parents, grandparents, other family members, friends, and/or employers (subject to applicable rules).

Investment choices are intentionally limited. The account is designed to encourage long-term investing rather than speculation.

Permitted Investments:

• Broad-based U.S. stock market index funds
• Low cost funds that carry no more than a 0.10% (10 basis points)

Trump Account vs. 529 Plan

Many parents will naturally compare Trump Accounts to 529 plans. While both can be valuable savings tools, they serve different purposes.

Key differences of a Trump Account:

• Eligible children may receive a $1,000 government contribution
• Potential uses beyond education expenses
• Encourages long-term saving from an early age
• Distributions for qualified education expenses avoid penalty but growth is generally still taxed as ordinary income

Key differences of a 529 Plan:

• Potential state tax deductions (state-specific)
• Higher contribution limits
• Specifically designed for education funding
• Distributions used for qualified education expenses are generally tax-free.

Your child generally must:

To qualify for the $1,000 government contribution, the child must also be born between January 1, 2025, and December 31, 2028.

Parents or guardians can establish the account by:

Once established: