What You Should Know About Trump’s Children’s Accounts
The Trump administration is preparing to roll out the first-ever investment account for children that aims to help the next generation of Americans build a nest egg by giving them exposure to financial markets at a young age.
During the Super Bowl, tens of millions of Americans caught a glimpse of what was to come. In a 30-second ad, advocacy group Invest America touted the wealth-building benefits of the accounts, which are slated to launch on July 4. The commercial revealed that millions of accounts will be pre-funded by the government.
“That’s free money,” said one boy in a paint-stained T-shirt as a group of children played in the background. Many other kids in marketing have said that accounts can help them achieve their dreams of home ownership, business and a college education.
In recent remarks to Congress, Treasury Secretary Scott Bessent called Trump’s accounts the “defining policy” of Trump’s presidency — and America’s 250th anniversary later this July.
“They mark a moment in economic history by expanding the benefits of private ownership and inclusive growth for all Americans,” Bessent said.
Here’s what you need to know about the most anticipated accounts, and that they will live up to the hype.
What are Trump accounts?
Newly created through the One Big Beautiful Bill Act, Trump accounts are free, tax-deferred investment accounts for children, such as savings accounts and individual retirement accounts, or IRAs.
Although the program is overseen by the US Treasury Department, the accounts themselves will be managed by private, commercial banks.
Parents will be able to open accounts for any child with a Social Security number, but for children born between Jan. 1, 2025, and Dec. 31, 2028, the Department of Finance will fund the accounts with a one-time deposit of $1,000 per eligible child. Not all children with an account will receive an incentive.
How do Trump Accounts work?
Initially, the accounts functioned as a reserved brokerage account. That is, parents can open them on behalf of their children and act as custodians of the accounts until the child turns 18. This period is known as “the period of growth.”
In this category, parents, friends and employers can contribute up to a combined $5,000 per year to investment accounts. This limit may increase annually based on inflation. Withdrawals from the account are limited.
In addition to the federal government’s $1,000 seed money, donors and state or local governments can also contribute to the accounts, and that amount will not count against the $5,000 annual limit.
Contributions should be invested in low-cost index funds or exchange-traded funds that broadly track the US stock market.
The main idea of the account is to use time in the market and compound interest over years – even decades – to turn initial contributions into larger sums when the children are older.
On Jan. 1 of the year the child turns 18, the account leaves the maturity period, ownership is transferred to the child, and the account effectively becomes an IRA, subject to the same withdrawal rules.
For example, the funds can be used without penalty for education (including apprenticeships), up to $10,000 in down payments or expenses related to starting a business. Initial investment restrictions are also removed, although contributions can only be made by the account holder.
Qualified withdrawals are taxed as ordinary income. But if the funds are used for other expenses, they are taxed as income plus a 10% withdrawal penalty. Like IRAs, the penalty ends when the account holder turns 59 1/2.
Who qualifies for Trump Accounts?
Any child with a Social Security number is eligible to have an account as long as a parent or legal guardian opens and claims it for them.
To qualify for the $1,000 seed grant from the federal government, the following birth date restrictions apply: Jan. 1, 2025, to Dec. 31, 2028.
“We will leave every child with real assets and a passion for financial freedom,” President Donald Trump said at a recent event to promote the accounts. “All Americans will start their lives with a good nest egg.”
How much can Trump’s accounts be?
Because Trump’s accounts are designed to take advantage of compound interest, they can generate handsome returns from relatively small contributions.
“Assuming historical growth rates continue,” Bessent said during a recent press conference, “a single deposit of $1,000 at birth should grow to a net worth of at least half a million dollars by retirement.”
While that statement is possible, it is based on several assumptions that may not apply to all account holders.
For example, the account holder will need to:
- You are eligible for a $1,000 federal seed grant.
- Invest in the S&P 500.
- Do not touch the account for more than sixty years.
In that case — and assuming the S&P 500’s historical growth rates of about 10% apply — an initial contribution of $1,000 today could grow to nearly $750,000 over 67 years.
Of course, the actual value of that nest egg will be much smaller due to nearly seventy years of inflation. However, if parents, employers or local governments contribute, that amount can be much higher.
Not touching money for 67 years is a big deal, too. Once young adults have access to funds at age 18, the temptation to spend will be high, and many will want to use at least some of the money for college expenses or home ownership.
Alternatives to Trump accounts
The two biggest comparisons to the Trump Accounts are 529 college savings plans and IRAs. Both accounts are opened by adults, usually parents or guardians, on behalf of children.
In 529 plans, contribution limits are more flexible than Trump Accounts. Average lifetime 529 limits vary by state but are generally between $500,000 and $600,000. No annual limits apply. 529 plans also often have variable investment options, although they are set by individual states.
529 plan withdrawal rules are generally flexible as well. When used for education-related expenses, 529 withdrawals are tax-free. That includes up to $20,000 for tuition or fees for K-12 schools and up to $10,000 for student loan repayments. Ineligible withdrawals are subject to income tax and a 10% penalty.
If there is money left over after graduation, up to $35,000 can be deposited into a Roth IRA as long as the 529 plan has been open for at least 15 years.
Another major alternative to Trump’s accounts is the final IRA. Like Trump’s accounts, these can be opened by children – usually their parents. Accounts can be Roth (pre-tax) or traditional (after-tax), while Trump accounts only allow after-tax contributions from parents.
Standard annual IRA contribution limits of $7,500 apply to custodial accounts, and investment options are as flexible as traditional IRAs.
At age 18, the young adult takes ownership of the account and can begin investing in it like a regular IRA.
Depending on the savings goal, both 529 accounts and IRAs boast the distinct advantages of flexibility with investment options and contributions.
However, these existing options lack one major benefit of Trump Accounts: a $1,000 jumpstart contribution from the federal government for some newborns.
How to open a Trump account
Currently, the main way to sign up for a Trump Account is when you file your taxes.
The IRS has issued form 4547 for parents and guardians who wish to enter the program. The form requires the names, addresses, Social Security numbers and other basic information for each child associated with the account.
For children born within the $1,000 federal donation date range, be sure to check box No.
Each form has only two child fields, but any number of children can be qualified. For three or more children, use as many additional forms 4547 as needed. Finally, attach the forms to your tax office and wait. Accounts and donations will begin to be issued in the summer.
Once the system is fully operational on July 4, trumpaccounts.gov will be accepting online applications again, so there’s no rush to apply during tax season. Meanwhile, parents can enter their email addresses on the website to receive updates.
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