Dear Uplevel,
Every time a new tax law creates another way to save or invest, I find myself wondering whether it is something I should act on.
This time, it’s Trump Accounts.
How do I know when a new account is genuinely worth considering—and when it is simply another option I may not need?
Sincerely,
Trying to Keep Up Without Chasing Every Trend
Our Take
Dear Trying to Keep Up Without Chasing Every Trend,
Every few years, Congress introduces a new way to save or invest, leaving many families wondering:
Is this something I should be paying attention to?
Today, that question is centered on Trump Accounts, a new type of retirement account created for children.
Whenever a new savings or investment option becomes available, it’s tempting to ask whether you should open one.
Before opening another account, it’s worth understanding what it’s designed to do, who can benefit, and how it might fit alongside the strategies you already have in place.
Here are the basics.
What Is a Trump Account?
A Trump Account is a new type of individual retirement account created for eligible children. Contributions became permitted beginning July 4, 2026.
Eligible children born from 2025 through 2028 may receive a one-time $1,000 contribution from the federal government. The child must be a U.S. citizen with a valid Social Secuirty number, and an election must be submitted to receive the contribution.
Unlike a 529 college savings plan, these accounts aren’t limited to education expenses. Its primary advantage is the opportunity to invest while the beneficiary is young and give those assets many years to grow.
Who Can Contribute?
Parents, grandparents, other individuals, employers, governments, and qualifying charitable organizations may contribute.
An employer may also contribute up to $2,500 annually through a qualifying employer program. The contribution is excluded from the employee’s taxable income and counts toward the general annual contribution limit. The $2,500 employer limit applies per employee, not per child.
How Much Can You Contribute?
Most individual and employer contributions are subject to a combined annual limit of $5,000 per child. The limit will be adjusted for inflation after 2027.
The federal government’s $1,000 pilot contribution, certain contributions from governments and charities, and qualified rollovers do not count toward the $5,000 limit.
Does My Child Need to Be Very Young?
Not necessarily.
The $1,000 government contribution is limited to qualifying children born from 2025 through 2028, but older children may still be eligible to have an account.
Starting earlier can still be valuable because the investments have more time to compound. A newborn has more years of potential growth than a teenager, but missing the government contribution does not necessarily mean the account is unavailable.
How Are the Funds Invested?
During the account’s growth period, the money must generally be invested in a mutual fund or ETF that tracks the S&P 500 or another qualifying index composed primarily of U.S. companies.
The fund cannot focus on one industry or sector, use leverage, or charge annual fees and expenses greater than 0.10%. Individual stocks and actively managed funds are not permitted during this period.
Most of these restrictions end on January 1 of the year in which the beneficiary turns 18. Traditional IRA rules generally apply after that point.
How Are Trump Accounts Taxed?
The tax treatment depends on the source of the contribution.
Contributions made by parents, grandparents, the child, or other individuals are made with after-tax dollars. They are not deductible, but they create tax basis in the account.
The $1,000 government contribution, qualifying employer contributions, and certain government or charitable contributions do not create tax basis. Those amounts are not taxable when deposited.
Investment growth is tax-deferred while it remains in the account. After the growth period, distributions are generally taxed under traditional IRA rules. The portion attributable to after-tax basis is not taxed again, while earnings and other pre-tax amounts are generally taxed as ordinary income.
Withdrawals are generally prohibited during the growth period, subject to limited exceptions. Afterward, taxable withdrawals made before age 59½ may also be subject to a 10% additional tax unless an exception applies.
How Does This Compare to a 529 Plan?
A 529 plan is specifically designed for education and generally offers tax-free withdrawals for qualified education expenses.
A Trump Account is designed for longer-term investing and is not limited to education. However, it also has tighter investment and withdrawal restrictions while the beneficiary is a minor, and future taxable withdrawals generally follow traditional IRA rules.
The accounts serve different purposes and may complement each other. The better option depends on what the family wants the money to accomplish.
Should I Open One?
A Trump Account could provide another way to invest for a child or grandchild, particularly when the goal extends beyond education.
Before opening one, consider:
- What is this money intended to accomplish?
- Are existing accounts already meeting that goal?
- How important are access and flexibility?
- How does the account fit with the family’s broader tax and estate-planning strategy?
Trump Accounts may become a useful planning tool for some families. Whether one belongs in your plan depends less on the account name and more on the role it would serve.
Because the accounts are new and additional administrative guidance may still be issued, some implementation details could continue to evolve.
Onward and Uplevel,
Anika & Amanda
Uplevel Wealth is a fee-only, fiduciary wealth management firm serving clients in Portland, OR, and virtually throughout the U.S.
