Trump Accounts Clarified
We wanted to circle back on the newly announced “Trump Accounts” now that the dust has settled a bit and we have a clearer picture of what they actually are — and what they aren’t. Created under Section 70204 of the One Big Beautiful Bill Act (OBBBA), these accounts are designed for children and can be opened from birth until the year before they turn 18. Families can contribute up to $5,000 per year, indexed for inflation, and unlike traditional or Roth IRAs, no earned income is required. Contributions can also come from governments, charities, or employers, with employer contributions capped at $2,500 per year and not treated as taxable income to the child.
Before age 18, Trump Accounts follow a fairly strict set of rules. All funds must be invested in low-cost, broad U.S. equity index funds with fees at or below 0.1%. Withdrawals are generally not allowed, except for a single exception at age 17 when the full balance may be rolled into an ABLE account for a disabled beneficiary. Accounts can move into other Trump Accounts but cannot be rolled into traditional or Roth IRAs. If a child dies before turning 18, the account loses its tax-deferred status and any earnings become taxable.
After age 18, the accounts function more like a traditional IRA. Investment restrictions disappear, and standard IRA withdrawal rules generally apply. Contributions can be withdrawn tax-free, while earnings are taxed as ordinary income. Several questions remain unanswered, including whether these accounts can be converted to Roth IRAs, how required minimum distributions will work, and how Trump Accounts will interact with other IRA balances.
There is also a pilot program that may provide a $1,000 government contribution for children born in 2025, 2026, or 2027, if parents elect to participate. Details on how to claim this contribution and when accounts will be opened have not yet been clarified.
In short, Trump Accounts offer a new way to start long-term savings for children, with specific rules in place for both investments and withdrawals and potential government seed funding. While many operational details remain uncertain, they provide families — and in some cases employers, charities, or government programs — a new tool for thinking about early financial planning for kids.
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