What are Trump Accounts? A Quick Guide for Parents and Grandparents

Trump Accounts, a new type of retirement account for children created it in 2025, are starting to roll out this year. Here’s a quick rundown of what parents should know.

What is a Trump Account?

A new type of traditional IRA, established for a child. The child owns it. A parent or guardian manages it until the child is old enough to take over. While the account is designed for children, it’s ultimately a retirement account, so many of the same rules that apply to traditional IRAs eventually apply here as well.

Who Qualifies?

• Any child under 18 with a Social Security number
• Only one funded account is allowed per child

How Do You Open One?

• Set up online at trumpaccounts.gov
• Contributions can begin after July 4, 2026
• Initial accounts are set up through the Treasury, with the option to roll over to a different institution after launch

How is it Funded?

• Parents, grandparents, and others can contribute up to $5,000 per year, combined, not $5,000 each
• No earned income requirement for the child, unlike a typical IRA
• Employers can contribute directly, up to $2,500 per year
• Some employers may also let employees redirect their own paycheck, pre-tax, into their child’s account
• Both employer options count toward the same $5,000 annual limit
• Children born between January 1, 2025 and December 31, 2028 may qualify for a one-time $1,000 federal contribution, which doesn’t count toward the annual contribution limit, but it is generally taxable when withdrawn.

What Happens When the Child Turns 18?

• Beginning in the year the child turns 18, the account generally follows the same rules as a traditional IRA.
• Once treated as a traditional IRA, a Roth conversion may be worth considering during a low-income year: college, grad school, or early career

How Does This Compare to Other Ways to Save for a Child?

• 529 plans: built for education. Tax-deferred growth, tax-free withdrawals for qualified expenses. Trump Accounts aren’t limited to education, but don’t offer that same tax-free treatment.
• UTMA/UGMA custodial accounts: flexible, no contribution cap, but investment growth is taxed under kiddie tax rules every year, not just at withdrawal.
• Custodial Roth IRAs: require earned income, which Trump Accounts don’t. In exchange, a Roth offers tax-free qualified withdrawals, and contributions can be pulled out anytime, tax- and penalty-free.

A Trump Account isn’t a replacement for these accounts, but can work alongside 529s, custodial accounts, or Roth contributions.

Is a Trump Account Right for Your Family?

Like most planning decisions, the answer depends on your goals. For some families, a Trump Account may be a helpful way to start long-term retirement savings for a child, especially if the federal contribution or employer contributions are available. For others, a 529 plan, custodial Roth IRA, or another strategy may still be the better fit.

If you have young children or grandchildren and would like to explore whether a Trump Account belongs in your family’s plan, we’d be happy to help.

Tax and legal services are not offered through Alterra Advisors and Integrity Wealth. Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may include a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. Every state offers at least one 529 plan. You should also consider that certain states offer tax benefits and fee savings to in-state residents. Whether a state tax deduction and/or application fee savings are available depends on your state of residence. Non-qualifying distribution earnings are taxable and subject to a 10% tax penalty.