A new way to save for a child

Families now have one more tool for investing on a child's behalf. Trump Accounts, created under federal law in 2025, became available on July 4, 2026, joining 529 plans, UGMA/UTMA custodial accounts, and custodial Roth IRAs. They come with their own rules and benefits, and some details are still being finalized by the Treasury and the IRS.

At its core, a Trump Account is a traditional IRA established for a child and designated as a Trump Account when it's opened. The child is the beneficiary and legal owner, while a parent or guardian acts on the child's behalf until age 18. Think of it as a starter IRA for kids, built on a familiar retirement-account framework.

The Treasury is setting up and administering the initial accounts. Over time, families are expected to be able to roll an account over to a financial institution that offers a Trump Account product.

Who is eligible

Any child under 18 with a Social Security number can have a Trump Account. Under the Treasury's pilot program, U.S. citizens born between January 1, 2025, and December 31, 2028, may also receive a one-time $1,000 seed contribution when a tax election is filed on the child's behalf. Only one funded Trump Account is allowed per child.

Children who don't qualify for the seed can still have an account; they just won't receive the $1,000.

How contributions work

The combined limit is $5,000 per child per year from all sources, indexed for inflation after 2027. Two sources don't count toward that limit: the government seed and qualified contributions from states, local governments, and charities.

• Individuals. Parents, grandparents, or any adult can contribute with after-tax dollars. The child doesn't need earned income, and those after-tax contributions aren't taxed again when withdrawn.
• Employers. An employer may contribute up to $2,500 per employee per year (indexed for inflation), which can be split among an employee's children. These contributions are excluded from the employee's income and count toward the child's $5,000 limit.
• Employees through payroll. Where an employer's plan allows it, employees can redirect part of their pay pre-tax into a child's account. Employer and employee contributions combined can't exceed $5,000 per child.
• Governments and charities. These "general funding" contributions don't count toward the annual limit but are taxable when withdrawn.

For example, a parent with two children whose employer contributes $1,250 to each child's account could add up to $3,750 more to each, bringing both to $5,000, subject to plan limits.

How the money can be invested

The investment menu is intentionally simple. Accounts may hold mutual funds or ETFs that track the S&P 500 or another qualifying equity index, with at least 90% invested in U.S. companies. Leverage isn't allowed, and expense ratios are capped at 0.10%. Providers must designate a default investment and may offer several options within those rules. The design favors long-term, broad-market exposure at very low cost.

Withdrawals and what happens at 18

Trump Accounts are built for the long term. Before the year the child turns 18, withdrawals generally aren't allowed except for limited rollovers. After that, traditional IRA rules generally apply: withdrawals before age 59½ are typically taxable and may face a 10% penalty unless an exception applies, such as certain education expenses, a first-time home purchase (up to $10,000), birth or adoption costs (up to $5,000), qualifying medical expenses, disability, or terminal illness. Required minimum distribution rules also apply.

Once the beneficiary reaches 18, there are generally three paths:

• Keep it as a Trump Account under general IRA rules. It may remain a separate account type that isn't grouped with other IRAs when calculating the taxable portion of a withdrawal.
• Roll it over to a traditional IRA or another eligible retirement account. This may not happen automatically, so action may be required.
• Consider a Roth conversion if it fits the young adult's tax situation. More IRS guidance on this option is expected.

Watch for the kiddie tax

Withdrawals of pre-tax money and earnings count as a child's unearned income. Under the kiddie tax, part of that income may be taxed at the parent's rate rather than the child's. It can apply to an 18-year-old who earns less than half of their own support, or to a full-time student age 19 to 23 who is mostly supported by a parent. Even a withdrawal that avoids the penalty can create a larger-than-expected tax bill, which matters especially for college-age children.

How Trump Accounts compare

• 529 plans are built for education. Earnings grow tax-deferred, and withdrawals for qualified education expenses are tax-free. Many states also offer a deduction. Trump Accounts aren't limited to education but follow IRA rules after 18.
• Custodial Roth IRAs require the child to have earned income, but qualified withdrawals are tax-free and contributions can be withdrawn at any time without tax or penalty.
• UGMA/UTMA accounts have no annual contribution limit (gift tax rules apply) and broad flexibility, but growth is taxable under the kiddie tax rules.

Because they don't require earned income, limit investments to low-cost index funds, and lock up the money until 18, Trump Accounts may work best as a complement to these accounts rather than a replacement. For working teens, see our article on giving your kids a $1 million head start with a Roth IRA.

How to open one and next steps

Opening starts with an election through the IRS, either by filing Form 4547 or using the online tool at trumpaccounts.gov. After the election, the Treasury provides instructions for activating the account. Rollovers to financial institutions can only happen once the initial Treasury account exists, and more guidance is expected.

1. Claim the seed if your child is eligible, and plan to invest it.
2. Decide on funding from family members and, if offered, your employer, within the annual limit.
3. Coordinate with other accounts such as 529 plans, custodial Roth IRAs, and UTMAs to balance tax benefits and flexibility.
4. Keep records of every contribution source for future tax reporting.

For families planning for a newborn or young child, a Trump Account can be a simple, low-cost way to start investing early. The most value comes from coordinating it with your education, gifting, and estate plans.