Trump Accounts, created under the One Big Beautiful Bill (OBBB), offer families a new way to invest in their children’s future. Eligible newborns receive a $1,000 federal deposit, and families can deposit up to $5,000 each year. Funds must be invested in low-cost, diversified portfolios and grow tax-deferred until the account transitions into an IRA at age 18. While 529 plans remain the best tool for education savings, Trump Accounts are designed to build long-term wealth and provide children with a head start in retirement savings.
Contents
- How the Accounts Work
- Contributions, Investments, and Growth
- Access to Funds and Qualified Uses
- Comparing with 529 Plans
- Looking Ahead
How the Accounts Work
Children born between January 1, 2025, and December 31, 2028, are automatically eligible for a one-time $1,000 federal contribution once an account is opened. If parents do not set up an account one will be created when the child first appears on a tax return, ensuring the benefit is not overlooked. Beginning in 2026, families of children under 18 who fall outside the eligibility window can still open accounts, although those accounts will not receive the $1,000 deposit.
Once established, these accounts hold investments in IRS-approved, low-cost mutual funds or exchange-traded funds (ETFs). This keeps fees minimal and ensures the money is positioned for steady, long-term growth. On the child’s 18th birthday, the account automatically becomes an IRA-like structure. Control of the funds phases in gradually: from ages 18 to 25, the account holder may withdraw up to 50% of the balance for qualified purposes; from ages 25 to 30, up to 100% may be withdrawn for qualified purposes; after age 30, funds may be withdrawn for any purpose, even if not qualified.
Contributions, Investments, and Growth
Up to $5,000 per year can be contributed to a child’s account. Contributions from family members, friends, or even employers all count toward the same annual cap. The total deposited into the account cannot exceed $5,000 in a given year, regardless of how many people contribute.
Investing the funds in diversified, low-cost portfolios is meant to provide the best chance for the savings to grow efficiently over time. The tax-deferred structure means investment earnings are not taxed until funds are withdrawn, allowing balances to compound more effectively over the years.
Access to Funds and Qualified Uses
No withdrawals are allowed before the age of 18 (except for permitted rollovers, e.g., to an ABLE account, a tax-advantaged savings account for individuals with disabilities). After age 18, withdrawals become possible under the phased control rules. Qualified purposes include education expenses, job training programs, and first-time home purchases. These withdrawals are not subject to early withdrawal penalties. Between ages 18 and 25, up to half of the account balance may be withdrawn for these purposes. From 25 to 30, the full balance may be accessed for qualified purposes. After age 30, withdrawals are permitted for any purpose, including nonqualified uses, though nonqualified withdrawals will be subject to income tax.
While Trump Accounts are primarily intended for retirement, there are exceptions that allow earlier, penalty-free access for certain purposes. These include qualified education costs, job training programs, and first-time home purchases. However, the potential of the account lies in letting the funds remain invested for decades, building a substantial foundation for future financial security.
Comparing with 529 Plans
Families familiar with 529 education savings plans may wonder how these new accounts fit in. The two serve different purposes. A 529 plan is built specifically for education, with tax-free growth and withdrawals when used for qualifying school expenses. Contribution limits are much higher than the $5,000 annual cap on Trump Accounts, and many states provide additional tax incentives for 529 contributions.
The Trump Accounts, on the other hand, grow tax-deferred rather than tax-free and are designed primarily to transition into retirement savings. They are best thought of as a complement to 529s: one helps prepare for education expenses, while the other ensures a child enters adulthood with retirement savings already underway.
Looking Ahead
Trump Accounts represent a new tool for families who want to invest in their children’s futures. With a $1,000 federal deposit available for eligible newborns, annual contributions from multiple sources, and a phased-in path to control between ages 18 and 30, these accounts are designed to provide long-term benefits. While they are not a substitute for 529 plans, they can be a powerful complement. By using both together, families can cover education costs and set their children on the path to lasting financial independence. To make the most of this opportunity, families may wish to discuss contribution strategies and eligibility details with a trusted advisor.
Sahaley DuPree is a Senior Accountant at ARB specializing in tax compliance and planning for private client services, auto dealerships, and construction companies. Beyond her client work, she is actively involved in ARB’s recruiting and community committees, where she helps foster the firm’s culture and advance its outreach in the greater Portland community.
