As part of the One Big Beautiful Bill Act (OBBBA), the federal government has introduced a new long-term savings vehicle: Trump Accounts. Designed to help families invest in their children’s future, these accounts offer tax-deferred growth, broad funding eligibility, and a one-time federal contribution for eligible children born between 2025 and 2028.
While technical guidance is still forthcoming, this presents an opportunity for families looking to supplement existing education and wealth-building strategies, such as 529 plans or Uniform Transfers to Minors Act (UTMA) accounts. Below, we break down what’s currently known about how Trump Accounts work, how they compare to other savings options, and how they might fit into your broader financial plan.
Who is eligible?
Children born between January 1, 2025, and December 31, 2028, are eligible to receive a one-time $1,000 federal contribution. Accounts may still be opened for children born outside of this window, but they will not receive the initial government deposit.
Who can contribute?
- Annual Contributions: Family and friends can contribute up to $5,000 annually per child, starting in July 2026. Unlike a traditional or Roth IRA, there is no earned income requirement. Contributions are permitted through the end of the calendar year before the child turns 18.
- Employer Contributions. Employers may contribute up to $2,500 annually on behalf of a minor employee or the dependent of an adult employee. These contributions are tax-free and count toward the $5,000 annual limit.
Tax Treatment + Withdrawals
- Tax Treatment of Contributions + Growth: Contributions are made with after-tax dollars and are not tax-deductible. However, all earnings and contributions grow tax-deferred. When withdrawn, ordinary income tax will be owed on the earnings and on the portion of contributions made by an employer, if any.
- Withdrawals: Withdrawals are generally restricted until the child reaches age 18. If Trump Accounts follow the same rules as Traditional IRAs, withdrawals above the contribution amount will be taxed as ordinary income and may be subject to a 10% early withdrawal penalty unless used for qualified purposes (to be defined in future regulatory guidance, such as education or first-time home purchases).
- Gift Tax Implications: The 2025 annual gift tax exclusion is $19,000 per recipient. It remains unclear whether Trump Account contributions will fully qualify under this exclusion, which we expect further clarification on.
Investment Requirements:
Funds must be invested in a low-cost mutual fund or ETF that tracks a US stock index, with annual expenses capped at 0.1% to ensure cost efficiency.
How do trump accounts compare to 529 plans?
While Trump Accounts and 529 College Savings Plans can complement each other, they serve different purposes and offer distinct benefits:
Feature | Trump Account | 529 College Savings Plan |
Federal Seed Contribution | One-time $1,000 seed for eligible children (2025 – 2028) | None |
Annual Contribution Limit | $5,000 (plus up to $2,500 employer match; not indexed until 2027/2028) | No federal limit (state limits vary) |
Tax Treatment | After-tax contributions; tax-deferred growth; withdrawals may be taxable (rules pending) | After-tax contributions: tax-free growth if used for qualified education |
Qualified Withdrawals | TBD (likely IRA-style rules; awaiting regulatory guidance) | College education expenses: K-12 tuition (up to $20k annually starting in 2026), approved apprenticeship programs, and up to $10k towards student loan repayment |
Investment Options | Us index funds/EFTs (<0.1% fee) | Varies by state plan |
Overall, Trump Accounts could provide families with a tool to start building wealth for their children at an early age, especially when used in conjunction with other savings strategies like 529 plans. The one-time federal contribution and flexibility of use may make this account particularly appealing for families seeking long-term financial security options beyond education planning. However, it is important to note that we are still waiting for technical guidance to clarify how these accounts will be implemented and managed.
At Aldrich Wealth, we’re committed to helping individuals and families make informed financial decisions that support their long-term goals. If you have questions about whether a Trump account aligns your family’s goals, please contact your Aldrich Wealth Advisor. We are here to help you make informed decisions about your future.
Disclosure: This content is for informational purposes only and not investment advice.
