What Are Trump Accounts?

What Are Trump Accounts?

A Trump account is a type of traditional individual retirement account (IRA) created specifically for children. The Treasury Department creates an initial account for each eligible child once a parent, guardian or other authorized adult submits an election, and the child is named as the account owner from the start.

Unlike a traditional savings account at a bank, a Trump account is an investment account. Contributions are placed into mutual funds or exchange-traded funds (ETFs) that track a broad U.S. stock index, similar to how money in a brokerage account or 401(k) plan can be invested.

That structure means the account's value can rise and fall with the market, and it's designed to grow over the many years before a child reaches adulthood.

How Do Trump Accounts Work?

Every Trump account is opened in a child's name and follows a growth period, which runs from the account's creation until December 31 of the year before the beneficiary turns 18. Several special rules apply only during this stretch.

A legal guardian, parent, adult sibling or grandparent—in that order of priority—can act as the authorized adult who opens the account and manages it while the child is too young to do so. This person, called the responsible party, chooses among the approved investment options and can request transfers, though the funds themselves belong to the child.

Some contributions are subject to a $5,000 annual limit, while others don't count toward that yearly cap—more on that in a minute.

During the growth period, money in a Trump account can only go into low-cost mutual funds or ETFs that track a broad U.S. stock index, such as the S&P 500. These funds must charge no more than 0.1% in annual fees and expenses.

Note: Once the growth period ends and the child turns 18, the account converts to a standard traditional IRA, and the fuller range of investment options and IRA rules take over.

Who Is Eligible for a Trump Account?

Eligibility for opening a Trump account is different from eligibility for the government's $1,000 contribution, and it helps to understand both separately. A child qualifies to have a Trump account opened on their behalf if they meet these requirements:

• The child hasn't turned 18 by the end of the year the election is made.
• The child has a Social Security number issued before the election.
• The child cannot already have a Trump account opened in their name.

There's no income requirement for the family and no requirement that the child have a job or earned income (this sets a Trump account apart from a standard custodial IRA).

The one-time $1,000 pilot program contribution has narrower eligibility. To qualify for it, a child must meet all of these conditions:

• The child must be a U.S. citizen and have a Social Security number.
• The child must be born on or after January 1, 2025, and before January 1, 2029.
• No pilot contribution election has already been made for the child.
• The child can't have a previous pilot program contribution.

How to Open a Trump Account

Opening a Trump account starts with submitting IRS Form 4547, Trump account Election(s), either through an online tool at trumpaccounts.gov (you'll need to download a mobile app) or by filing the form along with a tax return.

To complete the election, you'll generally need:

• The child's Social Security number: The number must have been issued before the date of the election.
• The child's date of birth and address: These details are used to confirm their identity and eligibility.
• Your identifying information: The government will use these details to verify that you're an authorized parent, guardian, adult sibling or grandparent.

The election to open an account can be made any time before the calendar year in which the child turns 18. If you also want to claim the $1,000 pilot contribution, you can request it on the same form.

How Much Can You Contribute to a Trump Account?

You can generally contribute up to $5,000 each year to a Trump account, and that amount will be indexed for inflation starting in 2028.

However, certain contributions from other parties aren't counted against you. More specifically, there are five different ways you and others can add money to a Trump account, and each option has its own rules:

• The $1,000 federal pilot contribution: This is a one-time deposit for eligible children that doesn't count against the annual contribution limit.
• Qualified general contributions: These are contributions funded by state or local governments, tribal governments or 501(c)(3) organizations for an entire group of eligible children. They're also excluded from the annual contribution limit.
• Employer contributions: Employers can contribute up to $2,500 per employee per year—tax-free to the employee—toward the Trump account of an employee or an employee's dependent. These additions count toward the annual $5,000 limit.
• Contributions from other sources: Anyone else, including parents, grandparents, family friends or the child themselves can contribute to the account. These contributions are subject to the annual limit.
• Qualified rollover contributions: These are trustee-to-trustee transfers of an entire account balance from one Trump account to another for the same beneficiary. Qualified rollovers must be for the full account balance—partials aren't accepted—and there's no limit to how much you can transfer.

When Can Money Be Withdrawn From a Trump Account?

During the growth period, a Trump account is largely locked. Withdrawals aren't permitted except in four specific situations:

• Qualified rollover to a new Trump account: This involves moving the full balance of one Trump account to another for the same child beneficiary.
• Rollover to an ABLE account: Eligible children with a disability are allowed to roll their Trump account funds into an ABLE account, which offers tax-advantaged savings and investment options without affecting their eligibility for most federal benefits. However, this is only allowed when the child is 17 years old.
• Return of excess contributions: If your contributions went over the annual limit, you can withdraw the excess funds to avoid a 6% annual penalty.
• Distribution after the child's death: If the account beneficiary dies before turning 18 years old, the account stops being a Trump account and is treated as fully distributed to the person or estate who receives the funds.

Once the growth period ends and the child turns 18, the account starts operating like a standard traditional IRA. The account owner can then take distributions, though withdrawals before age 59½ are generally subject to a 10% additional tax unless an exception applies, such as for qualified higher education expenses or a first home purchase.

Be aware: A Trump account doesn't allow hardship withdrawals or early access to funds for any reason during the growth period, even in a financial emergency.

Are Trump Accounts Taxable?

Trump accounts offer tax-deferred growth, but the details depend on when and how money moves in and out of the account.

Contributions from the $1,000 pilot program, qualified general contributions and employer contributions are treated as pretax money, while contributions from parents, grandparents or other individuals count as after-tax money—also known as basis.

After the growth period ends, distributions follow standard traditional IRA tax rules. The portion of a withdrawal attributable to basis isn't taxed again, but pretax contributions and all investment earnings are included in the account owner's gross income and taxed at ordinary income rates when withdrawn.

Trump Account vs. Other Investments

Trump accounts share some features with other popular ways to save for a child, but the differences in ownership, contribution limits and investment options are significant enough to affect which account fits your family's goals:

Should You Open a Trump Account for Your Child?

Whether a Trump account makes sense for your family depends on your goals and how comfortable you are with its restrictions.

A Trump account can be worth considering if:

• Your child is born between 2025 and 2028. If this is the case, they may qualify for the free $1,000 government contribution.
• You want a low-fee, hands-off investment option. Eligible Trump account funds are capped at 0.1% in annual expenses and fees.
• Your employer offers matching contributions. This can allow you to maximize your contributions without doing it all on your own.

A Trump account may be less appealing if:

• You want to save the money specifically for college. A 529 plan offers tax-free withdrawals for qualified education expenses and may come with state tax breaks.
• You might need access to the funds before the child turns 18. In this case, you may consider a custodial account.
• You want more flexibility with your investment options. You'll get more options with an UGMA or UTMA account. However, if you're still focused on retirement, you may consider a custodial IRA instead.

Building a Financial Foundation for Your Child

A Trump account can be a useful part of a broader plan to build your child's financial future, especially given the built-in $1,000 head start for eligible kids and the low costs baked into the investment rules.

That said, it tends to work best alongside other savings tools, not as a replacement for them, particularly if college costs or short-term flexibility are priorities for your family.

As you weigh your options, remember that saving and investing are only part of setting your child up for financial success. Teaching them healthy money habits, including how credit works, matters just as much over time. As they turn 18, Experian Go^™ can help them establish their credit profiles and get started on their credit journey.