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The recently passed One Big Beautiful Bill Act (OBBBA) introduced a new type of savings vehicle that is beginning to generate significant attention: Trump Accounts. While the name may be politically charged, the planning implications are worth understanding as these accounts roll out in 2026.
What Are Trump Accounts?
At their core, Trump Accounts are tax-advantaged investment accounts for children under age 18, designed to encourage long-term saving and wealth accumulation from an early age.
Structurally, they resemble a custodial traditional IRA, where:
- The child is the legal owner of the account
- A parent or guardian manages the account until age 18
Contributions
Contributions can only be made to beneficiaries who have not yet attained age 18. At launch, there will be three different methods of funding Trump Accounts:
- Direct Contributions: These are contributions that the child, parents, grandparents, etc. make to the account. These contributions are limited to $5,000/yr (indexed for inflation). In contrast to an IRA or Roth IRA, there is no earned income requirement. These contributions are not tax-deductible.
- Employer Contributions: Employers have the option to contribute up to $2,500/yr/employee. These contributions can be made directly to the employee’s account (if under 18) or to the account of the child of an employee. Contributions made via this method do count against the $5,000/yr contribution limit. Several large companies have already pledged support for funding these accounts for employees. These contributions are tax-deductible to the employer.
- Qualified General Contributions: These are contributions made by the federal, state, or local government or 501(c)(3)’s. These contributions do not count against the annual limit and can be made to eligible participants and restricted by “qualified classes.” The most well-known example of this is the $1,000 federal government contribution being made to every U.S. citizen born from 2025-2028. Notably, Michael and Susan Dell (of Dell Computers) have also pledged $250 to all U.S. children 10 and under who live in a zip code with a median income under $150k (sorry Dublin).
Growth and Distributions
Investment options are limited to low-cost U.S.-based index funds or ETFs. Similar to existing retirement accounts, growth (interest, dividends, and capital gains) is tax-deferred.
Distributions will be unavailable until age 18. After attaining age 18, distributions containing both after-tax (direct contributions) and pre-tax (employer contributions, qualified general contributions, and growth) will be partially tax-free and partially taxable and will be assessed on a pro-rata basis between after-tax and pre-tax amounts. Distributions will also be assessed a 10% penalty if taken prior to age 59½ (with the same exceptions as an IRA).
In many ways, these accounts are designed to function as a “starter retirement account” for children, encouraging early exposure to investing.
Enrollment
Trump Accounts are scheduled to be made available starting July 4th, 2026. To pre-register, you can either file Form 4547 (I wonder how they came up with that form number) with your taxes, or go to trumpaccounts.gov, click “get started”, and fill out the applicable information. How to apply for additional Qualified General Contributions, such as from the Dell Family, is not yet clear, though we expect details to emerge in the coming months. It is believed that the accounts will be initially custodied with the U.S. Treasury Department, with the potential to rollover to private sector custodians, such as Schwab and SEI, at some point, assuming they decide to support these accounts.
Strategy
Funding an account with after-tax contributions, only to have the earnings later taxed as ordinary income, is generally not a tax-efficient strategy. For that reason, I—and many others—initially discounted the value of Trump accounts beyond the benefit of the government’s initial contributions. However, recent IRS guidance regarding the treatment of these accounts after age 18 has made them more compelling, as it appears the funds may be eligible for conversion into a Roth IRA. This would allow for multi-decade, tax-free growth if the conversion occurs as early as possible—when account growth is minimal and the resulting tax liability is lowest. As always, individual circumstances will ultimately determine the viability of this strategy.
The Ultimate Question
All this information really boils down to one question: should I contribute? Taking free money from the government or your employer is a no-brainer, but choosing how to allocate your own limited capital warrants discernment. In general, specialized accounts such as 529 plans, UTMAs, and retirement accounts are the most effective way to save for their intended purposes. A 529 remains the best way to save for college. A UTMA remains the best way to retain flexibility, and Trump accounts seem to fill the void as a way to save for retirement at a young age, which would typically not be possible due to earned income requirements of retirement accounts.
Bottom Line
Trump Accounts represent a notable addition to the financial planning landscape—particularly for young families. While the government seed contribution and tax-deferred growth are appealing, these accounts come with trade-offs that must be evaluated in the context of a broader plan.
As with most planning strategies, the optimal approach will depend on the client’s goals—whether that’s education funding, long-term wealth accumulation, or flexibility for future use.
If you have questions about how Trump Accounts may fit into your financial plan, we’re happy to help evaluate the options.
