Trump Accounts Are Here. Are They Worth It for Your Family?

A new type of investment account was created as part of the One Big Beautiful Bill Act, and it comes with something genuinely rare in the tax code: a federal deposit of $1,000 for eligible children. That kind of headline tends to make people pay attention, and rightfully so. But before you rush to open one for your child or grandchild, it’s worth asking some more questions: who actually benefits most from these accounts, and how might they fit into your financial plan?

What Is a Trump Account?

Trump Accounts are tax-deferred investment accounts owned by a child under 18. Think of them as IRAs for minors.

Like traditional IRAs, money grows tax-deferred, meaning there are no taxes on dividends or gains along the way. Instead, taxes are paid when you take money out of the account, which can’t be done until the child is 18. Unlike traditional IRAs, contributions are not tax-deductible and have requirements about how they are invested.

For children born between 2025 and 2028, the federal government will make a one-time “pilot” deposit of $1,000 into the account. The eligibility requirements are straightforward: the child must be a U.S. citizen, have a valid Social Security number, and the family must opt in before the child turns 18. There are no income limits, so this deposit is available to all qualifying families regardless of income.

Annual contributions from parents, relatives, and others are capped at $5,000 per year, indexed for inflation after 2027.

How Do I Open a Trump Account?   

The accounts are expected to launch in mid-2026. To sign up, you can file a Form 4547 (named for the 45^th and 47^th President, I presume) with your 2025 tax return, or you can enroll online at www.trumpaccounts.gov later this year.

How Do I Invest the Account?

Until your child turns 18, the account must be invested exclusively in eligible index funds. These include funds or ETFs that track the S&P 500 or another qualifying equity index with at least 90% of the index composed of U.S. company equities. Funds must also have an expense ratio of 0.10% or less. Money market funds and cash are not eligible except briefly when reinvesting proceeds. In practice, this means accounts will hold broad, low-cost U.S. equity index funds.

Who Benefits Most?

Trump Accounts are not a universally superior savings tool, but they can serve a purpose.

The $1,000 Deposit Has Real Value for Everyone

A $1,000 seed growing over 18 years can become real money. At a 10% annual return, which is consistent with the long-term historical return of the S&P 500, $1,000 would grow to roughly $6,000 by the time a child turns 18.

Filing the election form takes a few minutes and carries no fees, no minimum contribution requirements, and no ongoing obligation to add more. The free $1,000 is a rare tax-code gift that truly doesn’t come with strings attached.

What’s more, several major companies including SoFi, Charles Schwab, BlackRock, and Robinhood have already announced plans to match the federal $1,000 deposit for employees’ children. Employers will be able to contribute up to $2,500 per year toward Trump accounts, which can be excluded from taxable income.

Charitable organizations may also contribute. Kids born outside the 2025-2028 window may receive seed money from non-governmental sources.  Michael and Susan Dell have pledged $6.25 billion to fund $250 contributions for up to 25 million children who are under 11, born before January 1, 2025, and live in ZIP codes where the median family income is $150,000 or less. Other philanthropic programs may follow.

Ongoing Contributions Benefit Few

Setting the pilot deposits aside, should families contribute additional dollars to a Trump Account?

For families with education as the primary goal, the 529 is undoubtedly the superior vehicle: education funds grow completely tax-free, many states offer a deduction on contributions, and the list of qualified expenses is expansive. A 529 is also a better account for purposes of qualifying for financial aid.  Conversely, Trump Accounts will eventually generate a tax bill on withdrawals, don’t qualify for deductions on contributions, and detract more from financial aid.

Here is a side-by-side of the two account types:

	Trump Account (IRC 530A)	529 Plan
Tax treatment	Contributions not deductible; growth tax-deferred; distributions taxed as ordinary income	Contributions not deductible federally; growth tax-free; qualified distributions tax-free
State tax deduction	No (some states may also tax earnings annually)	Yes, in many states
Best use	Long-term wealth building; general retirement or life goals	Education expenses (K–12 and college)
Annual contribution limit	$5,000/year (indexed after 2027)	No annual limit (subject to gift tax rules)
Investment options	Restricted: index mutual funds or ETFs tracking the S&P 500 or similar index with ≥90% U.S. equities; expense ratio ≤0.10%; no leverage	Broad range of mutual funds, ETFs, and other investment options
Access before 18	Generally not allowed	Available for qualified expenses at any age
FAFSA impact	Likely assessed as student asset (up to 20%) — details still emerging	Parent-owned: assessed at 5.64%. Grandparent-owned: no longer counted as student income as of 2024-25
Non-education use	Allowed; follows IRA rules after 18 (taxable, possible 10% penalty before 59½ unless exception applies)	Earnings taxed + 10% penalty; exceptions include beneficiary change, Roth IRA rollover up to $35k (SECURE 2.0), K–12 tuition, apprenticeships
Federal starter deposit	$1,000 for U.S. citizen children born Jan 1, 2025 – Dec 31, 2028; no income limits	None

That said, a Trump Account could make sense as a complement to a 529 if you want to build savings for a child’s future beyond funding their education.  

The people best suited to benefit from ongoing Trump account contributions are those who have excess money to save after funding their retirement and college savings accounts and want to build their child a nest egg for things like a first home, general investing, or a start toward retirement.

Even then, Trump accounts are just one of several wealth-transfer options like UTMA custodial accounts, custodial Roth IRAs, and irrevocable trusts, that offer more flexibility and, in some cases, better tax outcomes.

Practical Planning Takeaways

•        If your child was born between 2025 and 2028, opt in.

•        Check whether your employer offers Trump Account contributions.

•        Don’t redirect 529 contributions, especially if college savings is the goal.

For most families, Trump Accounts work best as a vehicle for capturing the pilot deposit and any employer contributions, not as a primary savings account. While the pilot deposit, employer contributions, and tax-deferred compound growth are real advantages, the lack of flexibility before age 18, restricted investment options, and tax benefits make them less advantageous than alternative investment accounts available to parents and their children.

If you’d like to talk through whether a Trump Account makes sense as part of your plan, we’re here to help.