Parents and grandparents have long searched for ways to give children a financial head start. Beginning on July 4, 2026, a new savings vehicle called a Trump Account may offer another option for building long-term wealth.
Think of it as a retirement account that starts at birth.
Each eligible child born between Jan. 1, 2025, and Dec. 31, 2028, can receive a one-time $1,000 contribution from the federal government. In addition, parents, grandparents, and others can contribute up to $5,000 annually (with inflation adjustments beginning in 2028) until the year the child turns 18.
While contributions are not tax-deductible, the account offers a valuable benefit: tax-deferred growth. Earnings accumulate without being subject to federal income tax while they remain in the account. The government’s $1,000 contribution does not count against the annual $5,000 contribution limit.
There is one major restriction: no withdrawals are allowed before age 18. The goal is to encourage long-term saving and investing.
Investment options are intentionally simple. Trump Accounts can only invest in low-cost mutual funds or ETFs that track broad U.S. stock market indexes, such as the S&P 500. These investments must meet strict fee limitations and cannot use leverage.
When the beneficiary turns 18, the Trump Account automatically converts into a traditional IRA. At that point, the account owner may make additional contributions if he or she has earned income and can begin taking distributions under the normal IRA rules.
Although withdrawals before age 59½ may trigger a 10% early-withdrawal penalty, numerous exceptions exist. Two of the most common exceptions are withdrawals used for qualified higher education expenses and first-time home purchases. While these exceptions can eliminate the penalty, the taxable portion of the withdrawal may still be subject to ordinary income tax.
Employers may also help fund these accounts. Beginning in 2026, employers can contribute up to $2,500 annually to the Trump Accounts of eligible employees’ children or eligible under-age-18 employees. These contributions are generally tax-free to the employee and deductible by the employer. Employer contributions are not in addition to the $5,000, but are included in considering that limitation.
The long-term growth potential is significant. For example, if a family contributes $5,000 annually for 17 years and the account earns an average annual return of 5%, the balance could grow to approximately $138,000 by age 18. If left invested until age 60 at the same return, the account could exceed $1 million.
Opening a Trump Account is expected to be similar to opening other tax-advantaged accounts. Families will need to confirm the child’s eligibility and Social Security number, select a participating financial institution, complete the application, choose an approved investment option, and fund the account.
Trump Accounts won’t replace 529 plans, custodial accounts, or trusts, but they may serve as a valuable complement. For families seeking decades of tax-deferred growth and a powerful wealth-building tool for the next generation, Trump Accounts could be worth a closer look.
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