President Trump’s “Beautiful Law” has many details yet to be unveiled, but hidden within this nearly 900-page bill lies a treasure worth learning for children, known as the “Trump Account”.
The Trump Account is a new type of savings account established by the federal government for children. This program will provide a starting fund or seed money of $1,000 for children born between early 2025 and the end of 2028 in the United States. Until the child reaches the age of 18, parents, friends, and family can contribute up to $5,000 annually to these accounts.
The investment options within these accounts include Exchange-Traded Funds (ETFs) and mutual funds, with an annual fee and expenses not exceeding 0.1%.
Additionally, companies can contribute up to $2,500 annually to accounts for their employees’ children. However, the total deposit limit remains $5,000. Starting from 2027, this limit will be adjusted according to inflation.
To be eligible for a Trump Account, children must be U.S. citizens with a Social Security number.
Children born after 2028 in the United States also qualify for a Trump Account. However, they will not receive the government-provided $1,000 seed money.
The operation of the Trump Account is similar to a non-deductible Traditional Individual Retirement Account (IRA), meaning the contributions to these accounts cannot be deducted. However, the income growth is tax-deferred until the child reaches the age of 18.
When the child turns 18, they can make withdrawals. At that point, the account essentially becomes a traditional IRA. This means that contributions to these accounts cannot be deducted. However, the earnings in the account can be tax-deferred until the child reaches 18.
These accounts will follow the deposit rules of an IRA. The deposit limit for IRAs in 2025 is $7,000, with these limits adjusting annually based on inflation.
However, remember that withdrawing funds from an IRA before the age of 59 and a half may incur a 10% tax penalty. The core design of these accounts is to help children start saving for retirement early.
House Speaker Mike Johnson, a Republican from Louisiana, stated in a release, “If you have a 401(k), you understand the importance of investing in your future early. ‘Trump Accounts’ adhere to the same principles and are implemented from the moment American citizens are born. This is a bold and transformative policy, giving children a financial head start from the day they are born. The purpose of ‘Trump Accounts’ is to lay the foundation for success for the next generation.”
The essence of the Trump Account is an investment account created for children. Those who meet the above criteria will receive an initial $1,000 starting fund. The initial contribution limit is $5,000.
The stock market averages about a 10% annual return. So, if a “Trump Account” is maxed out every year, the account could potentially grow to around $255,000 by the time the child turns 18.
If this money is left untouched until retirement at 67, the account could reach about $29,617,428 by then.
This assumes that you continuously deposit $5,000 annually until the age of 67, with a 10% compound annual return.
Children born between 2025 and 2028 will automatically be enrolled in the “Trump Account” program. However, parents will need to apply to receive the one-time $1,000 starting fund through a bank or other qualified financial institution.
Children born after 2028 who meet the criteria are likely able to have accounts established for them through participating banks or financial institutions.
Michael Dell, the CEO of Dell Technologies, stated in a release, “We believe that establishing these Trump Accounts is a simple yet powerful way to change the future for children. Decades of research show that giving children a financial head start can have a profound impact on their long-term success. With these accounts, the opportunities for children to go to college, start businesses, buy homes, and achieve lifelong financial stability will significantly increase.”
The “Trump Account” will officially take effect from the 2026 tax year. Before that, the White House is expected to reveal more details about this savings account.
However, there are several options available to secure a child’s financial future, such as custodial brokerage accounts, UGMA accounts (Uniform Gifts to Minors Act accounts), UTMA accounts (Uniform Transfers to Minors Act accounts), and 529 college savings plans.
The “Trump Account” is a savings and investment account aimed at helping children start on a path to financial health early. Children born between 2025 and 2028 in the United States will receive a one-time $1,000 starting fund. The operation of this account is similar to a non-deductible IRA, with funds invested in index funds. After the child turns 18, the account operates like a traditional IRA.