Trump Accounts are coming soon, and a donation announced this month will give some of those accounts an added boost. Here’s what you need to know about this savings and investment program.
First: these tax-deferred savings accounts named for President Donald Trump and established under the Working Families Tax Cuts Act are for any children under age 18 with Social Security numbers. However, only children born between Jan. 1, 2025 and Dec. 31, 2028 are eligible for a one-time $1,000 contribution from the Trump administration.
With a $6.25 billion charitable commitment from Michael and Susan Dell, the first 25 million American children age 10 and under living in ZIP codes with median incomes below $150,000 will receive an additional $250.
Another note: these accounts are intended to grow with investment earnings over time and money cannot be pulled out until children become adults and will function similar to a traditional Individual Retirement Agreement (IRA). While the $1,000 contribution is only for children born through the end of Trump’s term, parents and other contributors can put up to $5,000 in the accounts annually.
How to open an account: families can create accounts by using IRS Form 4547. Once elections are made, the U.S. Treasury will send information to the individual who made the election to activate the account through an authentication process and complete the opening of the initial Trump account next May.
What happens when the account is open: the government’s $1,000 contributions will be accepted starting July 4 of next year. Children, parents or guardians, grandparents, family members, friends, and employers may make contributions and the first $2,500 per employee per year excluded from the employee’s income. Qualifying charitable organizations and government entities may also make contributions to a specific class of recipients, such as all the children born in a given year. By law, the Trump Accounts may only be invested in broad U.S. equity index funds that track the overall U.S. stock market, “do not use leverage, and charge no more than 0.10% in annual fees.”
“The funds will be invested in a broad stock-market index, remain private property under guardian control until age 18, and, if fully funded and left untouched, could grow to as much as $1.9 million by age 28,” said the White House.
Where the account is held: initially, all of the Trump Accounts will be held with the U.S. Treasury’s designated financial agent. Parents or guardians should be able to transfer the account balance to their preferred brokerage firm at a later date.
“You could almost think of a Trump Account as a cross between a traditional individual retirement account (IRA) and a 529 savings account,” Charles Schwab explained. “In brief, these accounts will initially be eligible for after-tax contributions of up to $5,000 a year until the year the beneficiary reaches age 18. Like with an IRA, potential earnings can then grow tax-free and eligible withdrawals will generally be taxed at the beneficiary’s income tax rate. However, withdrawals are generally prohibited until the beneficiary reaches age 18, at which point the account will need to be converted to an IRA.”
This Tuesday, the IRS also issued a notice about the program with further information.
Data from the Pew Research Center published last summer indicated that 36% of adults under 50 who don’t want children said they couldn’t afford to raise a child. U.S. birth rates have been on the decline in recent years and the Trump administration has expressed concern about getting the birth rate up. In April, Audacy discussed whether Trump Accounts might encourage Americans to have children.