The Trump Account: What It Is, and Where It Actually Fits in Your Plan

There's a new account with the President's name on it, and every parent I talk to has the same question: is this actually worth it, or is it just noise? The short answer is it depends. The long answer is worth five minutes of your time, because part of this account is free money, and part of it is a trap if you don't understand the rules.

What Is a Trump Account

A Trump Account is a new type of retirement account, built just for kids. It was created by the tax law signed on July 4, 2025, and families will be able to start contributing beginning July 4, 2026.

Here's the simplest way to think about it: it's a starter IRA. The government opens the door for your child to begin saving for retirement before they can walk.

The account belongs to the child. An adult, usually a parent or guardian, manages it until the child turns 18. At that point, the child takes over, and the account turns into a regular traditional IRA.

Every eligible child qualifies. They need to be under 18 and have a valid Social Security number. That's it.

The Rules You Need to Know

This is the part that trips people up, so let's go slow.

The government seed money. If your child was born between January 1, 2025, and December 31, 2028, and is a U.S. citizen, the federal government will put $1,000 into their account. But it's not automatic. You have to elect it, using a form called Form 4547. Skip that step, and the $1,000 never shows up.

If your child falls in that window, this part isn't a close call. It's free money, sitting on the table, waiting for one form. There's no reason not to take it.

The yearly limit. Family and friends can put in up to $5,000 a year, combined, while the child is under 18. Grandma, grandpa, aunts, uncles, neighbors, it all counts toward that one number. Go over it, and the excess gets hit with a 6% penalty tax every year until it's pulled back out.

Employer contributions. If your employer offers it, they can kick in up to $2,500 a year on your child's behalf, and that money doesn't count as taxable income to you. It does eat into the $5,000 total, though.

Where the money goes. During childhood, the account can only be invested in low-cost index funds that track U.S. stocks, similar to the S&P 500. Fees are capped by law at 0.10% a year. You can't gamble this account away on individual stocks or crypto. That's the point.

The money is locked. Nobody can touch this account before January 1 of the year your child turns 18. Not for a medical emergency, not for school, not for anything, unless the child passes away or you're moving the money to another Trump Account. This is the biggest tradeoff of the whole account, and we'll come back to it.

That "unless the child passes away" clause is a good reminder that every account you open for your kids, this one included, needs a beneficiary plan behind it. We cover the importance in this video on estate planning.

Where It Fits: 529, UTMA, or Trump Account

Every family asks the same question. Which account should I actually use?

The honest answer is that it depends on what you're solving for.

Saving for college? A 529 plan wins. The money grows without being taxed, and it comes out tax-free when you use it for school. There's no better tool built for education than a 529.

Want your child to have real flexibility? A UTMA is your answer. There's no cap on how much you can put in, and the money can be used for anything that benefits the child: a car, a first apartment, a wedding, whatever life throws at them. The tradeoff is that a UTMA becomes fully theirs at the age your state sets, sometimes 18, sometimes later, and they can spend it on anything once it's in their hands.

Already optimizing a 529 and UTMA, or specifically thinking about your child's retirement? That's when a Trump Account earns its spot. It's not a replacement for the other two. It's a third bucket, built for a longer timeline than either one.

Think of it like this: a 529 is a shovel built for digging one specific hole. A UTMA is a Swiss Army knife. A Trump Account is a time capsule you can't open for eighteen years.

Sorting out which buckets to fund, and in what order, is really just wealth management for your family. If you want the full picture of how these pieces fit together with everything else you're building, The Moment Guide To Wealth Management For Business Owners walks through it.

Trump Account Guide – The Roth Conversion Opportunity at 18

Here's where this account gets interesting.

On January 1 of the year your child turns 18, the growth period ends, and the account becomes a regular traditional IRA. From that point forward, your child owns it and runs it like any adult would run an IRA.

That opens the door to a Roth conversion. Your child can move some or all of the money from the traditional IRA into a Roth IRA. Once it's in the Roth, it grows tax-free for the rest of their life, and qualified withdrawals in retirement owe no tax at all.

But a conversion isn't free. Any money that hasn't already been taxed, including that original $1,000 government deposit, gets added to your child's taxable income the year it's converted. Money that family members contributed out of pocket was already taxed once, so that part comes over clean.

Timing matters more than almost anything else here. The smart move is to convert during a low-income year, often right after college, before your child's salary climbs. Converting while they're still a full-time student and a dependent can backfire, because that conversion income may get taxed at your rate as a parent instead of theirs. We'll explain why in the next section.

Kiddie Tax and Other Rules to Watch

The kiddie tax is one of the most misunderstood rules in family financial planning, so let's clear it up.

While the money sits inside the Trump Account, growing, the kiddie tax doesn't apply. There's no yearly tax bill on the growth, because the account is tax-deferred, the same as any IRA. Nothing gets taxed until it comes out.

The kiddie tax shows up at a different moment: the Roth conversion. When your child converts the account after turning 18, the taxable portion of that conversion counts as unearned income. If your child is still a dependent, either under 19, or under 24 and a full-time student who doesn't cover half their own costs, that income can get taxed at your tax rate instead of theirs. For a lot of families, that rate difference is significant.

This is exactly why waiting until after college, once your child is no longer a dependent, often makes the conversion far cheaper.

Trump Account Guide – How to Open One

Opening a Trump Account takes three steps.

First, confirm eligibility. Your child needs to be under 18 with a valid Social Security number.

Second, decide who's opening it. The law sets an order of priority: a legal guardian first, then a parent, then an adult sibling, then a grandparent.

Third, file Form 4547. This is the form that opens the account and, in the same step, elects the $1,000 government contribution if your child qualifies. You can also apply online through trumpaccounts.gov.

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Frequently Asked Questions

Here are some answers to questions I received frequently about this topic.

Does every child automatically get a Trump Account? No. A parent or guardian has to actively open one using Form 4547 or the online portal.

Do we lose the $1,000 if we don't act right away? The election can be made anytime during childhood, but there's no reason to wait. The sooner the money is in, the longer it has to grow.

Can my child have both a Trump Account and a regular IRA once they're working? Yes. A working teenager can fund an IRA with their own earnings and still keep contributing to their Trump Account, up to the separate limits on each.

Is a Trump Account better than a 529 or a UTMA? A 529 is built for education. A UTMA is built for flexibility. A Trump Account is built for a head start on retirement. Most families end up using more than one.

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*Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.