Since the passage of the Big Beautiful Bill (OBBBA), we have received a lot of questions about Trump Accounts. We first discussed these accounts back in January when they were initially proposed, but now that they are officially available to open, we wanted to revisit the topic and provide an update on how they work and what families need to know. Questions have only increased over the last few months with announcements by both the Dell family and, most recently, by Ray Dalio, that they would make major contributions to these accounts on behalf of eligible children. The Dells have pledged an astounding $6.25 billion ($250 for up to 25 million eligible children), and Dalio pledged $75 million for children in Connecticut, his home state. Several employers have also signed on to make matching contributions to their employees’ contributions, including our own firm, BlackRock, Schwab, BNY Mellon, Dell, and others.
So, what is a Trump Account and how does it work? Essentially, it is an Individual Retirement Account (IRA) for children under 18 who have a valid Social Security number, without them needing to have earned income to contribute. The government will make a one-time contribution of $1,000 to the account for children born between January 1, 2025, and December 31, 2028. Children’s parents, grandparents, etc., can make their own contributions to the accounts in 2026 up to a combined limit of $5,000 per year, which will index for inflation starting in 2028. Employer matches can be made up to $2,500 per year, but those matching contributions do count towards the $5,000 total limit, unlike government contributions. The good news is that matches are not treated as taxable income to the employee. Contributions to Trump Accounts also do not affect regular IRA contribution limits, meaning that in addition to the $5,000 you can contribute to the Trump Account, you can also contribute up to $7,500 to another IRA. Trump Account contributions are not tax-deductible, as they might be for other traditional IRAs. Account owners should also maintain accurate records of all contributions, including employer matches and other deposits, to help ensure annual contribution limits are not exceeded and to support future tax reporting and account administration.
Logistics of the accounts include no withdrawals before age 18, other than rollovers. Once the child turns 18, the account converts to a traditional IRA. Distributions are allowed, but they follow the same IRA rules, which means unless they meet the strict criteria of exceptions (higher education, first home purchase, or disability), withdrawals prior to age 59½ are subject to a 10% penalty along with ordinary income tax. After age 59½, distributions are taxable but no longer subject to penalties.
Accounts can be opened now via an online portal at https://trumpaccounts.gov/. There will be a list of funds and ETFs that the accounts are permitted to hold, but will mostly be made up of low-cost index-type funds. Financial institutions offering these accounts will also have recordkeeping and reporting responsibilities to track contributions, balances, and distributions in accordance with IRS requirements.
Starting early with investing is the ultimate benefit. The magic of compound interest is the reason it is so important to start as soon as possible, and Trump Accounts make starting early even more attractive.
Frequently Asked Questions About Trump Accounts
1. Who is eligible to open a Trump account?
Any child under the age of 18 with a valid Social Security number is eligible to have a Trump Account opened on their behalf. Children born between January 1, 2025, and December 31, 2028, also qualify for the government's one-time $1,000 contribution.
2. How much can be contributed to a Trump Account each year?
Beginning in 2026, family members can contribute a combined total of up to $5,000 annually, with the limit adjusted for inflation starting in 2028. Employers may also contribute up to $2,500 per year, but those matching contributions count toward the annual $5,000 contribution limit.
3. When can money be withdrawn from a Trump Account?
Funds generally cannot be withdrawn before age 18, except for rollovers. Once the account converts to a traditional IRA at age 18, withdrawals follow standard IRA rules. Early distributions before age 59½ may be subject to income taxes and a 10% penalty unless an IRS exception applies.