An Introduction to Trump Accounts

In 2025, Trump Accounts were introduced as part of The One Big Beautiful Bill Act (OBBBA). As of July 4, 2026, they’re officially live and available for parents to start signing up. 

If you or someone you know has a child under 18, recently welcomed home a newborn, or might expect one in the next few years, you may be considering whether a Trump Account is the right move. Here’s what parents need to know about this new investment vehicle, including how it compares to other common savings tools for children.

What Are Trump Accounts?

Trump Accounts are an introductory or “starter” savings vehicle available to children under the age of 18. Parents, legal guardians, adult siblings, or grandparents can open an account for each eligible child. Each child may only have one Trump Account, however, and legal guardians or parents receive first priority on opening one. 

Families and employers (either of the child or their parent) can make after-tax contributions up to $5,000 per year until the child turns 18. Employer contributions are capped at $2,500 through 2027, after which they’ll be adjusted for inflation. Nonprofits and government donors may contribute as well, with no annual contribution limits.

Children born during the 2025-2028 four-year eligibility window qualify for a $1,000 government contribution to the account. 

How Do Trump Accounts Work?

Contributions will default to be invested into a SP500 ETF. Parents will have the option to select from a small menu of other ETF options as well. The goal is for options to be low-cost and largely domestic. 

On January 1st in the year the child turns 18, the account will transition to a traditional IRA and act as such moving forward.

Normally, a person must earn income to contribute to an IRA, creating a common roadblock for parents looking to start their children’s retirement accounts early. Trump Accounts allow parents and other relatives to start saving early, while bypassing the earned income requirement while the child is still a minor and potentially unemployed.

Are There Tax Advantages to Trump Accounts?

Contributions are made after-tax, meaning they are not immediately tax-deductible for parents or other contributors. When withdrawn, the contributions won’t be taxed again, but any growth in the account will be taxed as ordinary income. Throughout the growth period, investments grow tax-deferred, meaning no tax is collected until a withdrawal is made. 

If an employer, government entity, or donor contributes to a child’s Trump Account, the contribution does not count towards the family’s taxable income. 

When Can Withdrawals Be Made?

The funds in a Trump Account can’t be accessed during the growth period under any circumstance except death.

Once the child turns 18, the account transitions to a traditional IRA, meaning normal withdrawal rules apply. Your child will be eligible for penalty-free distributions starting at age 59.5, though the same exceptions for early withdrawals apply (first-time homebuying, education, etc.). As a reminder, while your contributions are returned tax-free, the investment earnings are still subject to ordinary income tax, even when the distribution is qualified.

If your family is eligible for an ABLE account, you may have the option to roll your Trump Account into an ABLE account in the year the child turns 17. 

Trump Account vs. 529 Plans

State-sponsored education savings plans, called 529 plans, help families cover qualifying costs associated with K-12 tuition, apprenticeship programs, college tuition, and professional exams or certifications. Parents or grandparents open and fund the account, and the student is named the beneficiary. 

Trump accounts and 529 plans have a few things in common. They’re both intended to help families save for a child’s future expenses. Contributions in each account grow tax-deferred, and neither offers upfront federal tax deductions.

Use Case

A 529 plan is specifically geared toward educational expenses and related costs. Even with recent expansions (like Roth IRA rollovers), it’s still best suited for families confident they’ll use the funds for schooling.

A Trump Account is designed to help children get a head start on their retirement savings, though qualifying educational expenses are exempt from withdrawal penalties. For that reason, it can be a better fit for families who want flexibility or whose children may not attend college.

Contribution Limits

529 plan limits vary by state. Massachusetts has an aggregate account limit of $500,000. This represents the maximum amount a family can contribute to a single beneficiary’s 529 plan over the account’s lifetime. There are no annual contribution limits for 529 plans, though contributions exceeding the annual gift exemption limit are reportable to the IRS.

Trump Accounts have annual contribution limits of $5,000, which can only be made until the child turns 18. Once the child turns 18, traditional IRA contribution rules and limits apply.

Trump Account vs. UTMA

Uniform Gift/Transfer to Minor Accounts (UGMA/UTMA) are brokerage accounts established and held by a parent or grandparent until the intended recipient (the child) reaches adulthood. In Massachusetts, a child is automatically given ownership of the account when they turn 21. 

A UTMA allows parents to invest in a broader range of assets, including ETFs, mutual funds, stocks, and bonds. Unlike a Trump account or 529 plan, UTMAs have no withdrawal limitations. Once a child gains ownership of the account, they are free to withdraw however much they want, at any age, to spend on anything. 

Contributions are not tax-deductible. Growth is not tax-deferred either. Unlike Trump Accounts and traditional IRAs, there is no age restriction on withdrawals, making UTMAs much more flexible.

Is a Trump Account Right for Your Family? Consider Your Goals

If your concern is saving for education, a 529 plan offers greater tax advantages. The contribution limits are higher, and they come with potential state-level tax incentives. 529 plans also come backed by decades of proven use.

If you’re seeking more flexibility or aren’t sure what path your child will take, the Trump Account or UTMA offers a broader scope (though potentially fewer tax advantages). Beyond education, funds can be used for major milestones like first-time homebuying or, eventually, retirement.

Not sure which is right for you? Contributing to a combination of accounts could help capture a broader set of benefits. If you’d like to take a closer look at Trump accounts, including their advantages and drawbacks, we’re happy to help. Schedule a meeting with our advisors today to learn more.