The U.S. federal government is seeding Trump Accounts with $1,000 for eligible babies. Even if their children aren’t eligible for the one-time deposit, parents can still open tax-deferred Trump Accounts to fund themselves.
Trump Accounts encourage long-term investing, but are they the best option among similar opportunities? Investing in custodial brokerage, 529, or retirement accounts may be a better and more flexible avenue. Find out more about Trump Accounts and how they compare to other investment tools.
Which Children Can Get $1,000 for Their Trump Accounts
Children who are U.S. citizens, have work-eligible Social Security numbers (SSN), and are born between January 1, 2025 and December 31, 2028 can claim the one-time deposit. A legal guardian, parent, adult sibling, or grandparent can file IRS Form 4547:
- With their federal tax return.
- Through their IRS online account.
- Through the Trump Account website.
Once the IRS verifies the child’s information, the Treasury deposits $1,000 into their Trump Account. The money is invested immediately into the account’s default low‑cost index fund unless the parent chooses a different approved fund. The parent retains control of the account until the child’s 18th birthday.
The money cannot be transferred or withdrawn by the parent. It does not count as taxable income, reduce any other federal benefits, or affect FAFSA or student aid calculations.
Everything You Need to Know About Trump Accounts
Trump Accounts are investment-retirement accounts for children. Their purpose is to give kids a financial head start and reduce generational wealth inequality. Any child younger than 18 with a Social Security number can have an account.
Other individual retirement accounts (IRAs) require contributions to be solely from earned income, which is why most people don’t start saving for retirement until they are adults with jobs. Parents and others can contribute up to $5,000 per year to a child’s Trump Account. And employers can contribute up to an additional $2,500 per year.
Funds can only go into approved low-cost U.S. stock index funds. These tax-deferred accounts are treated like traditional IRAs, and there are no annual taxes on dividends, interest, or capital gains while the money stays in the account.
With long-term compounding (10% annually on average), the Treasury estimates:
- That the $1,000 seed money alone (with no additional contributions) would be worth $5,800 after 18 years.
- If a $250 annual contribution is made, the account could be around $20,700 after 18 years.
- If maximum contributions are made, the account could have a value of $303,800 after 18 years.
The child only owes taxes when money is withdrawn, and then it is taxed as ordinary income. The withdrawal rules are similar to other IRAs, the child cannot withdraw funds until they are 18 years old, and any withdrawal before they’re 60 years incurs a 10% penalty unless for the purposes of purchasing a first home or higher education.
Trump Accounts cannot be converted into other retirement accounts, such as a Roth IRA.
How Trump Accounts Compare to Other Financial Tools for Kids
| Account Type | Tax Treatment | Contribution Limits | Income Requirements | Withdrawal Rules | Primary Purpose |
| Trump Account | Tax‑deferred; taxed as income at withdrawal | $5,000/yr family + $2,500/yr employer | No earned income required | Locked until 18; IRA‑style penalties before 60; penalty‑free after | Long‑term wealth building for children |
| 529 Plan | Tax‑free growth for education | Very high (varies by state; often $300k+) | No income requirement | Tax‑free for education; penalties for non‑education | Education savings |
| Custodial Brokerage (UTMA/UGMA) | Taxable annually (kiddie tax rules apply) | No limits | No income requirement | No penalties; child gains full control at 18–21 | Flexible investing for any purpose |
| Traditional IRA | Tax‑deferred; taxed at withdrawal | $7,500/yr (typical) | Child must have earned income | Penalty before 59½; penalty‑free after | Retirement savings |
| Roth IRA | Tax‑free growth; tax‑free withdrawals | $7,500/yr (typical) | Child must have earned income | Contributions withdrawable anytime; earnings penalty before 59½ | Tax‑free retirement savings |
Each type has its pros and cons. The best account for your child depends on your contribution budget, expected college costs, and personal considerations.
For instance, unless your child has earned income, you cannot open an IRA on their behalf. A Trump Account is a tool to circumvent that obstacle, though it has other restrictions. A 529 account is an effective way to save funds for the child’s education.
Custodial brokerage accounts offer the most flexibility. There aren’t income requirements or contribution limits to fund it, and you can withdraw at any time without penalty. But there are no tax breaks, like contributing pre-taxed money or withdrawing tax-free. And children are subject to “kiddie” taxes on capital gains, dividends, and interest.
Some “What If’s” of Choosing a Long-Term Financial Tool for Your Child
There is no one-size-fits-all when it comes to money. So, let’s play around with some scenarios:
Your Child Gets the $1,000 Trump Account
No matter your politics, you shouldn’t say no to free money for your kid. If they’re eligible, open a Trump Account and watch it grow without you contributing a dime. The default investment is a broad‑market U.S. stock index fund, similar to the S&P Index fund. By the time your kid can withdraw without paying a penalty (60 years old), the value could be almost $305,000.
Your Child Will Likely Go To College
A 529 is a no-brainer for kids destined for higher education… or trade school… or even just high school. You can use the funds for tuition, books, and more for private, public, or religious schools from kindergarten to professional degrees.
By investing in steady ETFs:
· $100 a month/$18,000 total contributions could be $38,000 in 15 years.
· $250 a month/$30,000 total contributions could grow to $47,000 in 10 years.
· $500 a month/$30,000 total contributions could increase to $36,500 in 5 years.
The sooner you start investing, the better. Even small, consistent contributions add up big when they have years to compound.
Your Child & the Future are Full of Surprises
Who, in the early 2000s, could have predicted AI would take so many desk jobs in just 25 years? Then, Boomer parents insisted their Millennial children go to college, since computers were the wave of the future. Now, the most successful are those who opted for irreplaceable, blue-collar professions.
A custodial brokerage account is total flexibility. And if you’re smart, you can reduce the tax implications. For example, the first $1,300 of unearned income (like dividends, interest, and capital gains) is tax-free for minors. And the next $1,300 has a lower child’s tax rate. It’s only when the account earns more than $2,600 annually that it’s taxed at the parent’s rate.
