Trump Accounts are scheduled to begin accepting contributions on July 4th, and a number of clients have already reached out asking whether one is worth opening for their kids or grandkids.
The short version: they’re a genuinely useful addition to the savings landscape, but they’re unlikely to replace the accounts most families already rely on, such as 529 plans, Roth IRAs, and custodial accounts. Here’s what you need to know:
At a Glance
- Who can open one: Parent or legal guardian of a child under 18 with a Social Security Number
- Annual contribution limit: $5,000 (after-tax dollars; no upfront tax deduction)
- Government contribution: $1,000 for children born January 1, 2025 – December 31, 2028
- How it grows: Tax-deferred (no annual tax on investment gains)
- When funds can be accessed: Generally age 59½, with limited exceptions
- What it becomes: Depending on the custodian, it could convert to a traditional IRA at age 18
What Is a Trump Account?
A Trump Account is a new investment account for children, built around one headline feature: a one-time $1,000 contribution from the federal government for children born between 2025 and 2028.
From there, parents, grandparents, friends, and in some cases, employers can add to the balance. Unlike a custodial Roth IRA, a retirement savings account that requires the child to have earned income from a job, anyone can contribute to a Trump Account regardless of whether the child works.
How Do These Accounts Work?
Contributions are capped at $5,000 a year, made with after-tax dollars. The money is meant to stay invested, not spent young. Withdrawal rules work like retirement accounts rather than something like a 529, and when the child turns 18, depending on the custodian, the account could convert automatically into a traditional IRA.
For now, the investment menu is limited to low-cost funds tracking broad U.S. stock indexes like the S&P 500, though more options are expected over time.
What’s Appealing About Trump Accounts?
For eligible families, the free $1,000 is the easy part of the pitch – it’s money you don’t have to contribute yourself.
Opening an account at or near birth gives savings the benefit of time, allowing decades of tax-deferred growth before the funds are used. It also provides family members with another thoughtful way to contribute to a child’s future, alongside more traditional gifts such as savings bonds or graduation checks.
Where We’d Be Cautious
The tradeoff is that these funds are intended for long-term retirement savings, which can make them less flexible than other savings vehicles.
A few things worth weighing before treating it as more than a supplement:
- For education costs, a 529 plan remains the best option with tax-free growth and withdrawals for qualified expenses.
- For a child with earned income, a custodial Roth IRA typically offers more flexibility and a higher contribution ceiling.
- For goals outside of retirement, a UTMA or UGMA account provides substantial flexibility to withdraw funds before age 18, without the IRA restrictions.
In short: Trump Accounts are built for the long game. If flexibility or education funding is the goal, other vehicles are still the better fit.
Who Should Consider Opening a Trump Account?
This type of account makes the most sense if you:
- Have a child born between 2025 and 2028, so you qualify for the $1,000 federal contribution.
- You are already maxing out a 529 plan and want another long-term savings vehicle.
- You’re a grandparent looking for a more structured alternative giving a cash gift.
Our Take
There are many ways to save for a child’s future, and the right approach depends on your family’s goals and circumstances.
For families with an eligible child or grandchild, the $1,000 federal seed contribution makes a Trump Account worth considering as it’s an opportunity to receive funds that otherwise wouldn’t be available to you.
If you’d like to think through options together, reach out to your Crestwood team.
This document is provided for general informational purposes only by Crestwood Advisors, an investment adviser. Crestwood Advisors does not provide legal advice, and this document should not be construed as containing legal advice. For legal advice, consult with a licensed attorney. This document should not be construed as containing tax advice. For tax advice, consult with your tax adviser. Account rules and features are subject to change as guidance evolves.
Sources:
https://trumpaccounts.gov/
https://www.investor.gov/introduction-investing/investing-basics/investment-accounts/tax-advantaged-accounts/trump-accounts
https://home.treasury.gov/news/press-releases/sb0508
