The One Big Beautiful Bill Act (OBBBA) created a new type of retirement account known as a Trump Account. These savings accounts are designed to help parents, grandparents and even employers start building retirement savings for children.
What Is a Trump Account?
A Trump Account is a special form of tax-deferred savings account that can be opened for any child under age 18 with a Social Security number. Contributions can begin in July 2026 and grow tax-deferred. Unlike traditional or Roth IRAs, there is no earned income requirement for contributions. This makes it possible to start long-term, tax-advantaged investing right away.
Children born in years 2025, 2026 or 2027 may qualify for a one-time $1,000 government contribution to their Trump Account. Details on how to claim this credit are still pending IRS guidance.
Rules Before the Child Turns Age 18
- Annual limit: Up to $5,000 per year (indexed for inflation)
- Who can contribute:
- Parents, grandparents and others
- Contributions are not tax-deductible
- Employers
- Up to $2,500 per year, counts toward the $5,000 limit
- Governments and qualified charities
- Not counted toward the $5,000 limit
- Parents, grandparents and others
- Investment restrictions: Limited to low-cost index funds tracking the S&P 500 or other broad U.S. equity indexes (fees capped at 0.1%)
- Withdrawals: Not allowed before age 18, except in limited cases (e.g., rollover to an ABLE account for beneficiaries with disabilities)
Rules After the Child Turns Age 18
At age 18, a Trump Account operates much like a traditional IRA:
- Both after-tax contributions and pre-tax contributions (from certain third parties) may be included.
- Standard IRA withdrawal rules apply, including qualified early distributions for first-time home purchase, education expenses, medical and disability expenses, etc.
- Other withdrawals are subject to a 10% penalty until age 59½.
- Investment options are no longer restricted.
- Distributions are generally taxed as ordinary income to the extent they exceed the contribution amount. However, distributions for “qualified purposes” from employer contributions may be taxed at capital gains rates. Further IRS guidance is needed.
Pros and Cons of Trump Accounts
Pros
- Retirement savings can begin from birth without earned income requirements.
- There is the potential for decades of tax-deferred or tax-free growth.
- Contributions can be made from various sources (family, employers, charities, governments).
- Contributions to Trump Accounts do not reduce allowable IRA contributions if the child has earned income.
- Low-cost, broad-market investment options encourage disciplined, long-term investing.
- There is a special $1,000 government contribution for qualifying newborns in 2025–2027.
Cons
- No early access — funds cannot be withdrawn before age 18, and standard IRA withdrawal rules apply thereafter.
- Investment choices are limited before age 18 (only certain index funds are allowed).
- Contributions by individuals are not tax-deductible.
- Many rules still need IRS clarification, including rollover options and interaction with Roth conversions.
Why This Matters
Trump Accounts address some of the limitations of existing savings vehicles:
- IRAs require earned income.
- Custodial accounts (UTMA/UGMA) become fully available to the child at the age of majority, regardless of the intended purpose.
- 529 plans are generally limited to education expenses.
Next Steps
Although the details are still emerging, families interested in contributing should consider whether a Trump Account will fit into their long-term planning strategy. While not a replacement for traditional 529 college savings plans or custodial accounts, these accounts provide another layer of flexibility, particularly for long-term growth. Coordination with other retirement and education savings accounts will be important.
Contact your RKL advisor today to discuss whether opening a Trump Account is right for you and your family.
