Everything You Need to Know About Trump Accounts
Saving for a child’s future just got another option. The One Big Beautiful Bill Act (OBBBA), passed under President Trump, created a new type of tax-advantaged savings vehicle called Trump Accounts. These accounts are designed to help families start investing early for their children’s long-term goals.
Under the new law, all U.S. children born between 2025 and 2028 are eligible for a one-time $1,000 federal starter contribution into their Trump Account with no parental income requirements needed. After that, parents, relatives, and others can contribute up to $5,000 per year per child, beginning in July year. Employers may also contribute up to $2,500 annually, and neither employer contributions nor the starter deposit count against the $5,000 limit.
These accounts must be invested in low-cost, unleveraged mutual funds or ETFs tied to broad U.S. stock indexes, with fees capped at 0.1% annually. The goal with these accounts is to keep investments simple and cost-effective, while still offering long-term growth potential as funds generally cannot be accessed until the child turns18. After that, withdrawals are just like a traditional IRA. Before age 18, there are exceptions, including rollovers to another Trump Account, transfers to an ABLE account for individuals with disabilities, or distributions of excess contributions.
The real question is how this new investment vehicle will stack up against existing ones. Compared to 529 college savings plans, Trump Accounts offer more flexibility but less favorable tax treatment. A 529 allows families to save specifically for education, with contributions growing tax-free and withdrawals also tax-free when used for qualified expenses. By contrast, Trump Account withdrawals at age 18 will be taxed as ordinary income. For families focused primarily on covering tuition and school-related costs, 529s are usually the stronger choice.
Another useful comparison is with Roth IRAs for kids. Roth accounts can be powerful long-term tools, but contributions are limited to a child’s earned income. Trump Accounts don’t have that limitation, since eligibility is automatic based on birth year and parents can contribute regardless of income. Perhaps the biggest trade-off is that Roth IRA withdrawals in retirement are tax-free, while Trump Account withdrawals will be taxed.
Finally, Trump Accounts share some similarities with custodial accounts (UGMA/UTMA), which give children broad flexibility to use funds once they reach the age of majority. Custodial accounts, however, are subject to the “kiddie tax,” meaning unearned income above $2,600 (in 2025) could be taxed at higher rates. Trump Accounts avoid annual taxation by deferring all taxes until withdrawal, although this can mean a larger bill later on.
Whether or not a Trump Account is worth having depends on your family’s goals. For many, it will not replace a 529 or Roth IRA but maybe serve just one more place to store some cash. The automatic $1,000 federal contribution makes it an attractive baseline benefit, and families who want to give their child a general-purpose savings pool—without tying it exclusively to education—may find Trump Accounts appealing. However, if minimizing taxes over the long run is your main objective, a 529 or a Roth IRA once your child has earnings is likely to remain the most efficient choice.