Trump Accounts, Explained — and Whether They're Worth Your Money

If your child was born between January 1, 2025, and December 31, 2028 — or you're expecting a child during that window — the government has set aside $1,000 for them through a new type of retirement account designed specifically for children.

The money is real, but it doesn't automatically appear. You have to claim it.

That part's straightforward. The bigger question is what comes next: Should you add your own money? Is this account better than other ways to save for your child? And what should you know before locking money away for decades?

Here's the answer, in plain English.

What is a Trump Account?

A Trump Account is, legally, a special type of Traditional IRA opened in a child's name — the same basic type of tax-advantaged retirement account many adults use, but started much earlier. It was created by a law passed in 2025, and accounts became available for contributions in July 2026.

Like a Traditional IRA, money inside the account grows tax-deferred. That means you don't pay taxes every year as investments grow — taxes generally come later, when money is withdrawn.

You also don't get unlimited investment choices. By law, Trump Account money can only be invested in a limited selection of low-cost funds that track the broader U.S. stock market. The funds' expenses are capped at 0.10% per year — about $1 annually for every $1,000 invested, extremely inexpensive compared with many investment products.

The account is designed to stay invested for the long term. Your child generally takes control at age 18, when it converts into an ordinary Traditional IRA, governed by normal IRA rules. This isn't a savings account for everyday expenses — it's designed to give your child a decades-long financial head start.

Claiming the free $1,000

If your child qualifies, claiming the government contribution is one of the easiest financial decisions you'll make. There's no cost to you, and skipping it means leaving money behind.

But it does require action. Here's the process:

1. Sign in to, or create, an account at IRS.gov. You'll need to verify your identity through ID.me.
2. Complete and submit Form 4547 to elect your child. Only a legal guardian, parent, adult sibling, or grandparent can file on a child's behalf, in that priority order.
3. On the form, check the box that specifically requests the $1,000 contribution — Line 7 of Part III. Skip it, and your child won't receive the deposit, even if they qualify.
4. Once it's processed, you'll get confirmation that the account is ready, and you can manage it going forward through the Trump Account app or trumpaccounts.gov.

The IRS estimates the form itself takes about five to ten minutes. If your child qualifies, there's very little reason not to claim it.

Should you add your own money?

The free $1,000 is the easy decision. The harder question is whether you should contribute your own money.

Beyond the government contribution, families and other eligible contributors can add up to $5,000 per year combined. Whether you should depends less on the account itself and more on your overall financial situation.

Here's what the math looks like. If you contributed the full $5,000 every year for 18 years, you'd put in $90,000 of your own money. Assuming the investments grew around 7% per year after inflation — a commonly used long-term estimate for U.S. stocks — that could grow to roughly $170,000 by the time your child turns 18.

That's a meaningful amount of money. But it also requires saving more than $400 every month, without interruption, for 18 years, and it assumes markets deliver their historical long-term average returns. For many families, that simply isn't realistic. That doesn't mean you're failing your child — the government contribution is still valuable, and building your own financial foundation comes first.

The tax wrinkle most people miss

Turning 18 doesn't give your child a checking account full of money to spend. The account becomes an ordinary Traditional IRA, meaning normal retirement-account rules apply: withdrawals before age 59½ can generally trigger taxes and a 10% early withdrawal penalty, unless an IRS exception applies.

The tax treatment is where Trump Accounts get interesting. Say you personally contribute $10,000 over several years, and by the time your child turns 18, that money has grown to $16,000. The original $10,000 is your basis — the amount you contributed with money that was already taxed when you earned it, so it isn't taxed again when withdrawn. The additional $6,000 is investment growth, and that portion is generally taxed as ordinary income when withdrawn.

Now add the government's $1,000 contribution. Suppose that grows to $1,600. That entire $1,600 is generally taxable when withdrawn — the government contribution was never part of your after-tax basis, so there's nothing there to protect from a second tax.

So the account contains two different tax buckets:

• Your own contributions, which generally come back out tax-free, since you already paid tax on that money once.
• Investment growth and the government's contribution, which are generally taxed as ordinary income when withdrawn.

That doesn't make the government contribution a bad deal — you should still claim the free money. It just means the entire account balance won't be tax-free later.

Is this the best place for extra savings?

A Trump Account isn't automatically the best place for every extra dollar you want to save for your child. Two alternatives are worth considering.

529 plans

A 529 plan is specifically designed for education expenses. In many states, contributing can provide a state tax benefit — a 5% state tax benefit on a $5,000 contribution, for example, would put $250 back in your pocket. The tradeoff is flexibility: a 529 works best when the money is used for qualified education expenses, and using it for other purposes can create taxes and penalties. If college is the main goal, a 529 plan is often the stronger first choice.

Custodial Roth IRAs

A custodial Roth IRA can be extremely powerful, but there's one major requirement: your child must have earned income. A summer job, a babysitting business, or other legitimate earned income can make this option available. Once your child qualifies, Roth IRA contributions are more flexible, because original contributions can generally be withdrawn at any time without taxes or penalties. If your child has earned income and you want maximum flexibility, a custodial Roth IRA is worth considering.

Who benefits the most?

The families who get the biggest benefit from Trump Accounts are the ones who already have room in their budget to save thousands of dollars each year — they're the ones who can turn the account into something like the $170,000 example above, just by contributing consistently over 18 years. Families who can't contribute beyond the government deposit still benefit; the $1,000 is real money and a meaningful head start.

But this program won't, by itself, transform a family's financial situation. It's a foundation, not a complete plan.

What to do this week

1. Check whether your child was born between January 1, 2025, and December 31, 2028. If so, file Form 4547 and claim the $1,000 — it costs nothing and takes about ten minutes.
2. Before adding your own money, make sure the basics are covered: an emergency fund, your full 401(k) match if one's offered, and any high-interest debt paid down. Those come first because they offer a better guaranteed return than extra dollars in a kid's account — see Tame Your Debt and Room to Breathe, and Stage 5 for the 401(k) match specifically.
3. If college is your goal, compare a 529 plan in your state before committing additional savings here.
4. If you want a flexible, long-term investment for your child and they don't have earned income yet, a Trump Account is a reasonable option for the extra dollars.

You don't need a finance degree to make the right choice here. Claim the free money. Protect your own financial foundation. Then decide where your extra dollars will do the most good for your child.