Trump Accounts: Quick FAQs
1. What are Trump Accounts?
Trump Accounts are new tax-advantaged savings accounts created under the One Big Beautiful Bill (OBBBA). Each eligible child born between January 1, 2025 and December 31, 2028 will automatically receive a $1,000 government-funded account to help jump-start long-term savings.
2. Who is eligible?
Children born during the 2025–2028 window. Accounts are established automatically, but parents/guardians may be required to designate a custodian.
3. How much can I contribute?
Families (and in some cases, employers) may contribute up to $5,000 per year per eligible child. Contributions are not tax-deductible, but account earnings grow tax-deferred.
4. How do these accounts grow?
Funds grow tax-deferred, meaning you won’t pay taxes on interest, dividends, or gains while money remains in the account. At age 18, balances may roll into a traditional IRA, where they continue to grow for retirement.
5. When can money be withdrawn?
Withdrawals are generally restricted until age 18. At that point, funds can be rolled into an IRA. Other early-use rules are still being clarified by the Treasury/IRS.
6. How are Trump Accounts different from 529s or Roth IRAs?
- 529s: Designed for education expenses; withdrawals for non-education purposes may trigger penalties.
- Roth IRAs: Funded with earned income; tax-free withdrawals in retirement.
- Trump Accounts: Seeded with $1,000 at birth, funded by contributions up to $5,000/year, grow tax-deferred, with rollover to IRA at 18.
7. Will Trump Accounts affect college financial aid or benefits eligibility?
That remains unclear. Guidance on whether these balances will be counted for financial aid or means-tested programs is still pending.
8. Are there investment choices?
Details are limited. Early reports suggest the funds may be invested in low-cost, broadly diversified stock or bond funds, but we’re awaiting final rules on available options.
9. What if parents or guardians don’t contribute?
The account will still receive the $1,000 government seed. Left untouched, this could grow meaningfully over decades, but contributions significantly boost long-term impact.
10. What should families do now?
- Confirm eligibility if expecting a child in 2025 or beyond.
- Plan contributions alongside other savings vehicles (529s, Roth IRAs, custodial accounts).
- Stay tuned for IRS/Treasury guidance on rules, investments, and reporting.
Bottom Line Trump Accounts are a new planning tool—not a replacement for existing strategies. They can provide a valuable boost to a child’s financial future, but the real power will depend on how families integrate them into a broader plan.