If you have a child under 18 or a baby on the way, you may be wondering about the Trump Account, a new savings option for your child. As part of the One Big Beautiful Bill Act signed into law in 2025, the federal government created a brand-new tax-deferred savings vehicle for children, complete with a one-time $1,000 government deposit for eligible newborns.
For parents and grandparents across America, it raises a natural question: What exactly is this, and should I open an account for my child?
Trump accounts are a legitimate financial tool with real benefits and real limitations. Whether they make sense for your family depends on your goals, your child’s age, and how these accounts interact with the other savings strategies you may already have in place.
What Is a Trump Account?
Established by federal legislation known as the One Big Beautiful Bill Act of 2025, the Trump account is a tax-deferred investment account created specifically for children under 18.
The account functions similarly to a traditional IRA but with special rules that apply throughout childhood. Earnings grow tax-deferred until the child reaches adulthood. At the start of the calendar year in which the child turns 18, the account automatically converts into a traditional IRA and follows standard IRA rules from that point forward.
The $1,000 Government Seed Contribution
One of the most widely discussed features of Trump accounts is the one-time $1,000 pilot program contribution from the U.S. Treasury. Children who are U.S. citizens born between January 1, 2025, and December 31, 2028, are eligible to receive this deposit, provided a parent or guardian files the required election using IRS Form 4547. There are no income requirements for this contribution.
Children born before 2025 are not eligible for the $1,000 seed money. However, they can still have a Trump account opened on their behalf, as long as they are under 18 and have a valid Social Security number.
Who Can Contribute to the Account, and How Much?
Trump accounts are flexible in terms of who can contribute. Parents, grandparents, family members, and friends can all add funds. Employers may also contribute up to $2,500 per year, and that amount is excluded from the employee’s taxable income. Qualifying charitable organizations and certain government entities may also make contributions in some circumstances.
Annual individual contributions are capped at $5,000 per year, a limit that will be indexed to inflation after 2027. Employer contributions count toward this cap. The child does not need to have earned income to receive contributions, a notable difference from custodial Roth IRAs, which require the child to have earned at least as much as the amount contributed.
How Are Trump Accounts Taxed?
It’s important to understand the tax treatment of Trump accounts before deciding whether to open one.
Trump accounts are taxed similarly to how traditional IRAs are taxed: contributions grow tax-deferred, but tax rates upon withdrawal depend on the source of the contributions. Money contributed by individuals (like parents or the child) is made after-tax, so the principal is received tax-free. The $1,000 seed money, as well as contributions made by an employer or other organization are made pre-tax, so earnings are taxed as ordinary income.
Before age 18, withdrawals are generally not permitted. Once the account converts to a traditional IRA at age 18, the standard 10 percent early withdrawal penalty applies to distributions taken before age 59½, unless an exception applies. Penalty exceptions exist for qualified education expenses, a first-time home purchase, and certain other qualifying situations. However, ordinary income tax will still apply even when the penalty is waived.
One strategic option to discuss with the team at Griggers Wealth Management is converting the account to a Roth IRA at or shortly after age 18, particularly if the young adult is in a low tax bracket at that time. Paying taxes on the converted amount now in exchange for tax-free growth going forward may be advantageous depending on the situation.
What Can the Money Be Invested In?
Unlike a 529 plan or a custodial brokerage account, a Trump account has strict investment limitations during the growth period. Funds must be held in mutual funds or exchange-traded funds that track the S&P 500 or another index composed primarily of American equities. There is a 0.10 percent cap on expense ratios, and leveraged funds are not permitted.
This means account holders cannot select individual stocks or invest in other asset classes until the account converts to a traditional IRA at age 18.
How Do Trump Accounts Compare to Other Children’s Savings Options?
Trump accounts are one of several tools families can use to save for a child’s future. Understanding the differences can help clarify when a Trump account may or may not be the best fit.
Trump Accounts vs. 529 Plans
529 plans are designed primarily for education expenses. Contributions grow tax-advantaged, and qualified withdrawals for eligible education costs are entirely tax-free at the federal level. For families focused specifically on funding college or trade school, 529 plans may offer a more tax-efficient option, since withdrawals from Trump accounts for education are still subject to ordinary income tax. Only the 10 percent penalty is waived, not the income tax itself.
That said, Trump accounts are not limited to education. Once converted to an IRA at age 18, funds can potentially be used for a broader range of purposes, including a first home purchase or retirement savings. The two account types are not mutually exclusive, and some families may find value in maintaining both.
Trump Accounts vs. Custodial Roth IRAs
A custodial Roth IRA is a powerful vehicle for children who have earned income, since contributions grow tax-free and qualified withdrawals in retirement are also tax-free. However, contributions cannot exceed the child’s earned income for the year, which limits how much can be contributed during early childhood.
Trump accounts do not require earned income, which makes them accessible to children of any age, including infants. However, unlike a Roth IRA, withdrawals from a Trump account are taxed as ordinary income, which is a meaningful difference over the long term.
Trump Accounts vs. UGMA/UTMA Custodial Accounts
Uniform Gift to Minors Act and Uniform Transfers to Minors Act accounts allow families to invest on a child’s behalf with no annual contribution limits beyond gift tax thresholds. However, investment gains in these accounts may be subject to the so-called kiddie tax, which taxes a child’s unearned income at the parent’s rate in certain situations. Trump accounts offer tax-deferred growth, which may be more advantageous depending on the child’s future income level.
Should You Open a Trump Account for Your Child?
That depends. Trump accounts offer a genuine benefit — particularly the $1,000 seed contribution for eligible children born between 2025 and 2028, which amounts to free starting capital that will grow for years before the child reaches adulthood. For families who want a simple, low-cost way to introduce a child to long-term investing, the account structure is straightforward.
At the same time, the restrictions are real. Funds are locked until age 18 without exception. Investment options are limited to U.S. equity index funds during the growth period. And unlike a Roth IRA or 529 plan, withdrawals are not tax-free. Income tax applies to a meaningful portion of any distribution, regardless of what the money is used for.
Whether a Trump account is the right fit for your family is a decision that depends on your child’s age, your existing savings strategy, your tax situation, and your goals. For many families, a Trump account may work best as a complement to existing tools rather than a replacement for them. The best step is to have a conversation with a Griggers financial advisor who can review your full financial picture and help you decide whether and how this new account type fits in.
Frequently Asked Questions About Trump Accounts
Who is eligible to open a Trump account?
Any child under 18 years old with a valid Social Security number may have a Trump account opened on their behalf. There are no income requirements for the family. Children who are U.S. citizens born between January 1, 2025, and December 31, 2028, are also eligible for a one-time $1,000 government seed contribution, provided a parent or guardian files IRS Form 4547 to make the election.
When can you actually open a Trump account?
According to the U.S. Department of the Treasury and IRS guidance, contributions to new Trump accounts begin on July 4, 2026. Parents who file IRS Form 4547 will receive instructions from the Treasury to activate and complete the account opening process. Some details about the program are still being finalized, so it is worth checking current IRS and Treasury guidance as the launch date approaches.
Can the $1,000 from the government be withdrawn immediately?
No. Funds in a Trump account, including the $1,000 government contribution, are locked until the start of the calendar year in which the child turns 18. Before that point, withdrawals are generally not permitted except in very limited circumstances, such as the death of the account beneficiary. The funds are intended to grow over the child’s lifetime.
Are Trump accounts better than 529 plans?
It depends on your primary goal. If funding education is the priority, a 529 plan may offer a tax advantage that a Trump account does not. Qualified 529 withdrawals for education expenses are entirely tax-free, while distributions from a Trump account for education eliminate the early withdrawal penalty but are still taxed as ordinary income. For families interested in broader long-term savings beyond education, Trump accounts may offer additional flexibility once the child reaches adulthood. Many financial advisors suggest considering both rather than choosing one over the other.
What happens to a Trump account when the child turns 18?
On January 1 of the year the child turns 18, the Trump account automatically converts into a traditional IRA. At that point, the account operates under standard IRA rules.
Withdrawals are permitted but may be subject to income tax and, before age 59½, a 10 percent early withdrawal penalty, unless an exception applies. The account holder may also choose to convert the account to a Roth IRA at that time, which could be advantageous if they are in a low tax bracket.
Talk to the Financial Advisors at Griggers Wealth Management About a Trump Account Today: 866-653-8126
Trump accounts are a new option for your family savings landscape, but like any financial tool, they work differently depending on your situation. If you have questions about how a Trump account fits alongside your existing strategies, whether that is a 529 plan, a Roth IRA, or a broader financial plan for your family, the team at Griggers Wealth Management is here to help.
Families throughout Warner Robins and Middle Georgia trust Griggers Wealth Management for straightforward, personalized financial guidance. Call us today at 866-653-8126 to schedule a consultation and talk through what makes sense for your child’s future.
Griggers Wealth Management helps clients throughout Warner Robins, Perry, Macon, and the greater Middle Georgia area build and maintain portfolios using strategies tailored to their goals.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk, including loss of principal. No strategy assures success or protects against loss.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.
Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
