What Families Need to Know

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Last December, we previewed Trump Accounts. These are a new type of tax-deferred investment account designed to help families begin building long-term savings for children.

At the time, there were still plenty of questions about how the program would work in practice.

Now, we have some answers.

As of July 4, 2026, Trump Accounts are officially up and running. Contributions can be made and eligible families can begin taking advantage of the program. So, if you have a child or grandchild under 18 and you’re wondering whether how these accounts might fit into your family’s financial plan, now is a good time to revisit the conversation.

Here’s what we know today.

First, a Quick Refresher: What Is a Trump Account?

A Trump Account is a new type of individual retirement account (IRA) established for an eligible child. Unlike a traditional or Roth IRA, the child does not need earned income for contributions to be made during the account’s initial growth period.[i]

Generally, an account can be established for a child who has not yet turned 18 before the end of the calendar year in which the election is made and who has a valid Social Security number.

Once established, parents, grandparents, other family members and even employers may be able to contribute, subject to applicable limits.

The basic idea is fairly simple: give children an opportunity to begin investing early and potentially benefit from many years of compounding.

And when you’re talking about a time horizon that can stretch across decades, starting early can matter.

The $1,000 Federal Contribution

This is probably the feature that has received the most attention.

Children who are U.S. citizens born between January 1, 2025, and December 31, 2028, and who meet the program’s other requirements, may qualify for a one-time $1,000 contribution from the U.S. Treasury.[ii]

That $1,000 does not count toward the normal annual contribution limit.

There is an important distinction here: children outside that birth window may still be eligible to have a Trump Account. They simply aren’t eligible for the $1,000 pilot contribution.

In other words, don’t assume the account isn’t relevant simply because your child wasn’t born between 2025 and 2028.

How Much Can be Contributed?

During the growth period, most individual and employer contributions are subject to a combined annual limit of $5,000 per child, with that limit scheduled to be adjusted for inflation after 2027.[iii]

The key phrase there is per child. It isn’t $5,000 from Mom and Dad, another $5,000 from Grandma and Grandpa, and another $5,000 from an employer. Contributions subject to the limit are generally combined when determining whether the annual maximum has been reached.

Employers can contribute up to $2,500 annually through a qualifying employer program. Those contributions count toward the overall $5,000 limit.

Certain government and nonprofit contributions may be treated differently and may not count toward that annual cap.

This is one reason coordination matters. A generous family is a wonderful thing. A generous family in which everyone independently contributes without talking to one another can create a little more paperwork than anyone bargained for.

How is the Money Invested?

While the child is under 18, these accounts come with intentionally limited investment choices.

Funds generally must be invested in qualifying low-cost mutual funds or exchange-traded funds that track an index made up primarily of U.S. companies. Eligible investments are also subject to restrictions on fees and other characteristics.

That means these accounts aren’t designed for picking individual stocks, chasing the latest investment trend or frequently changing strategies.

And that may not be a bad thing. The structure is intended to keep costs low and encourage diversified, long-term investing during the child’s early years.

What About Taxes?

This is where the details become especially important.

Trump Accounts offer tax-deferred growth, meaning investment earnings generally aren’t taxed each year while they remain inside the account.

Individual and family contributions are generally made with after-tax dollars and aren’t deductible. Those contributions generally establish tax basis in the account. However, the $1,000 government contribution, certain qualifying contributions from governments or nonprofits, and qualifying employer contributions generally do not establish basis.

Why does that matter?

Because eventually, the source of the money can affect how distributions are taxed. Keeping accurate records of who contributed what, and what type of contribution it was, can become important down the road.

The IRS has also provided a safe harbor under which certain individual contributions can qualify for the annual gift-tax exclusion without requiring a gift-tax return, provided the applicable requirements are met.

Tax rules can get complicated quickly, particularly when several people are contributing to the same child’s account. Your financial and tax professionals can help you understand how those rules apply to your particular situation.

Can the Child Use the Money Before Age 18?

Generally, no.

One of the biggest trade-offs is that the money is designed to stay invested during the child’s growth period. With limited exceptions (including certain rollovers, excess contributions and distributions following the beneficiary’s death) funds can’t simply be withdrawn for everyday expenses before the year the child turns 18.

Beginning January 1 of the calendar year in which the child turns 18, most traditional IRA rules generally begin to apply.

That opens additional possibilities, but it also introduces additional tax considerations. Early distributions may be subject to income taxes and a 10% additional tax unless an exception applies, such as certain higher-education expenses or a qualifying first-home purchase.

So while the account offers flexibility later, it shouldn’t necessarily be viewed as money available for near-term childhood expenses.

Is this Better Than a 529 Plan?

This may be one of the most important questions families ask, and the answer isn’t necessarily one or the other.

A 529 plan is specifically designed for education savings and can offer tax-free qualified withdrawals for eligible education expenses, along with potential state tax advantages.

A Trump Account, on the other hand, is designed more broadly around long-term investing for a child’s future and ultimately operates under IRA-like rules.

They solve different problems.

For some families, a Trump Account could complement a 529 rather than replace it. For others, prioritizing education savings, retirement contributions, emergency reserves or another financial goal may make more sense before making additional Trump Account contributions.

That’s where looking at the entire financial picture becomes much more useful than simply asking which account has the better features.

So, Should You Open a Trump Account?

For families who qualify for the $1,000 federal contribution, there’s an obvious reason to at least explore the opportunity. For everyone else with an eligible child, the decision deserves a little more context.

A Trump Account may offer another way to give a child a long runway for investing. But it also comes with contribution limits, investment restrictions, withdrawal rules and tax considerations that should be understood before you begin funding it.

More importantly, no account exists in a vacuum.

How much you’re already saving for education, whether you’re adequately funding your own retirement, your family’s cash reserves, tax situation and broader estate or gifting strategy can all influence whether, and how much, a Trump Account belongs in your plan.

At Larson Financial, we believe the goal isn’t simply to open every new account that becomes available. It’s to understand how each financial tool can work together to support the future you’re trying to build.

If you have questions about Trump Accounts, want to know whether a child in your family is eligible, or would like help opening and incorporating one into your broader financial plan, reach out to your Larson advisor. We’re happy to walk through the details with you.

[i] https://www.lathropgpm.com/insights/trump-accounts-basics-that-families-foundations-financial-institutions-and-employers-should-know/

[ii] https://www.whitehouse.gov/research/2025/08/trump-accounts-give-the-next-generation-a-jump-start-on-saving/

[iii] https://bipartisanpolicy.org/explainer/what-to-know-about-trump-accounts/