Big changes are coming to how families can save for their children’s future and they are starting soon.
Under the One Big Beautiful Bill Act (OBBBA), the federal government has introduced a brand-new savings vehicle called Trump Accounts. These accounts are designed to help children build long-term wealth from an early age, with tax advantages and even a potential $1,000 government-funded boost for eligible newborns.
Let’s break it down
What Is a Trump Account?
A Trump Account is a tax-advantaged investment account for children under age 18, designed to encourage early saving and long-term investing.
Think of it as:
- A starter investment account for kids
- With tax-deferred growth
- That later converts into a traditional IRA at adulthood
For some families, the government helps kickstart it with a contribution.
Who Can Have One?
A Trump Account can be opened for any child who:
- Is under 18 years old
- Has a valid Social Security number
The account may be opened by:
- A parent
- A legal guardian
- An adult sibling
- A grandparent
First come, first served in that order.
The $1,000 Government Contribution
For children born between January 1, 2025 and December 31, 2028, the government may provide a one-time $1,000 contribution if:
- The child is a U.S. citizen
- An election is properly made
Contributions including this one will not begin before July 4, 2026.
How Much Can Be Contributed Each Year?
During childhood (before age 18):
- Up to $5,000 per year can be contributed from all sources combined
- This limit applies to parents, relatives, and employer contributions
- The limit will be adjusted for inflation after 2027
Employer contributions: Employers can contribute up to $2,500 per year across all of an employee’s children and it is not taxable income to the employee.
How Is the Money Invested?
During the child’s growth years, investments are simple and low-cost:
- Broad U.S. stock market index funds such as S&P 500 trackers
- No leverage
- No sector-specific funds
- Fees capped at 0.1% annually
This keeps costs low and focuses on long-term growth.
When Can the Money Be Used?
- No withdrawals before age 18
- Starting the year the child turns 18, the account functions like a traditional IRA
That means:
- Withdrawals are generally taxed as income
- Early withdrawals before age 59½ may face a 10% penalty
-
Exceptions apply for:
- Higher education expenses
- First-time home purchase up to $10,000
- Disability and other qualifying situations
Tax Benefits at a Glance
Before age 18
- Contributions are after-tax
- Investment growth is tax-deferred
- Government and employer contributions are not taxable
After age 18
- Account follows traditional IRA rules
- Taxes apply at withdrawal except for basis
How Does This Compare to 529 Plans or Roth IRAs?
- More flexible than a 529 plan as funds are not limited to education
- Less tax-efficient than a Roth IRA but Roths require earned income
- A strong option for long-term general wealth building
Each family’s situation is different, but Trump Accounts add an entirely new option to the planning toolbox.
When Do Trump Accounts Start?
- Accounts apply to tax years after December 31, 2025
- Contributions including government funds begin no earlier than July 4, 2026
Where Can You Learn More?
The IRS will release:
- Official forms
- Online tools
- Ongoing guidance
Expected portal: trumpaccounts.gov
Why This Matters
Starting early, even with modest contributions, can dramatically change a child’s financial future.
Trump Accounts combine:
- Early investing
- Government incentives
- Tax-deferred growth
- Long-term flexibility
If you are thinking about generational wealth, this is a conversation worth having now.
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