Trump Accounts: A New Vehicle for Long-Term Savings

As part of the One Big Beautiful Bill Act (OBBBA), Congress has introduced a new savings vehicle known as Trump Accounts, officially referred to as Individual Trust Accounts. These accounts are designed to promote long-term savings for children starting at birth, with favorable tax treatment and unique contribution and funding rules. While similar in structure to traditional IRAs, Trump Accounts come with their own set of features tailored to encourage early investing and build financial security over time.

Who Can Have a Trump Account?

Trump Accounts may be established for any child under the age of 18 who has a Social Security number.

Contributions

The annual contribution limit for Trump Accounts is $5,000 per child per year (indexing for inflation begins in 2028). Contributions are not deductible. Unlike a traditional or Roth IRA, there is no earned income requirement.

Note: If an individual is eligible to contribute to both a Trump Account and a traditional or Roth IRA—for example, the individual is under the Trump Account age limit and has enough earned income to qualify for IRA contributions—he can fund both accounts. Contributions to one do not reduce the amount the individual can contribute to the other.

Other contribution considerations include:

• Contribution Window: Contributions are only permitted until the year before the child turns 18.
• 12-Month Delay: Contributions may not begin until 12 months after the bill’s enactment date of July 4, 2025.

Funding Sources

• Individuals: Parents, grandparents, or other individuals may contribute on behalf of a child.
• Federal Pilot Program: The Treasury will make a one-time $1,000 government-funded contribution for any U.S. citizen child born from 2025 through 2028. This amount does not count against the $5,000 annual limit. It is still unclear as to how the mechanics of this will work–will an election be made on the parents’ tax return or will a separate form be required to claim the credit?
• Employers: Employers may contribute up to $2,500 annually (indexed for inflation beginning in 2028) per eligible employee or employee’s dependent. These contributions are tax-free to the employee. Employer contributions count towards the $5,000 annual limit.
• Qualified General Contributions: Governments or 501(c)(3) organizations may contribute to a class of eligible minors (e.g., all children born in a given year in a geographic region). These contributions do not count against the $5,000 annual limit.

Investments

Accounts must be invested in mutual funds or ETFs that track a broad-based U.S. equity index (e.g., S&P 500) and charge no more than 0.10% in annual fees. Sector-specific or leveraged funds are not allowed. Once an account beneficiary turns age 18, the account is permitted to utilize any investment that is allowed in an IRA.

Distributions & Tax Treatment

Distributions are not permitted until the year the child turns 18, except to roll over the entire account balance into a 529A ABLE account in the year the beneficiary turns 17, assuming the beneficiary qualifies due to disability. Trump Accounts may be rolled over into other Trump Accounts at any time, provided they are rolled over in their entirety, but they cannot be rolled into other types of IRAs. Withdrawals for qualified expenses (e.g., higher education expenses, first-time home purchase, or small business expenses) avoid the standard 10% early withdrawal penalty. Otherwise, Trump Accounts receive similar tax treatment as a traditional IRA with respect to distributions.

• Contributions made by individuals (e.g., parents) are included in the child’s basis and not taxed again at distribution.
• Contributions made by the government, employers, or nonprofits are fully taxable when distributed.
• It is important to note that if the beneficiary dies prior to the year in which they turn 18, the account loses its tax-deferred status. The entire balance minus any direct contributions becomes taxable to the designated beneficiary, or to the account beneficiary’s final tax return if no beneficiary is named.

Trump Accounts offer a new tax-advantaged way to save for a child’s future, but they should be evaluated alongside other established savings vehicles. Depending on your goals, 529 plans and Roth IRAs may offer more favorable tax treatment. Consider the purpose of the funds, contribution limits, and withdrawal rules when determining the most appropriate strategy for your family. We’ve included a side-by-side comparison below to help you evaluate how Trump Accounts stack up against other tax-advantaged options like 529 plans and Roth IRAs.

Actions to Consider Now

Although Trump Accounts introduce an appealing new way to invest in a child’s future, they are not yet available. Contributions cannot begin until 12 months after the enactment of the One Big Beautiful Bill Act. Until then:

• Continue funding existing vehicles such as 529 plans or custodial Roth IRAs where appropriate.
• Review your savings strategy for children and grandchildren to determine how a Trump Account might fit alongside other tools.
• Talk to your advisor to determine how Trump Accounts could impact your long-term education, legacy, or tax planning strategies.

Closing Thoughts

With the ability to receive contributions from families, employers, and even public entities, Trump Accounts offer a flexible platform for building a child’s financial foundation. Still, these new tax-advantaged accounts are just one tool in a broader savings toolkit. Families should carefully consider their unique goals—whether focused on education, retirement, or legacy—when determining how these accounts might complement or enhance their overall financial strategy.

This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.