We are very fortunate to work with so many families at Greenway, many of which have expanded over the last few years! Whether planning for daycare, a career shift, or college, we’re now hearing one question repeatedly: "What’s the deal with the new Trump Accounts?"

Introduced under the One Big Beautiful Bill Act, these “Trump Accounts” are a new type of tax-advantaged investment account designed to jump start wealth-building for the next generation. 

A Trump Account is essentially a Kid IRA. It encourages investing from birth to provide a financial foundation at age 18 for major milestones like education, a first home or starting a business. If the funds aren’t used, they continue to grow tax-deferred until retirement, following standard IRA distribution rules. 

Frequently Asked Questions:

Q: Who is eligible?

Any U.S. citizens under the age of 18 with a valid Social Security Number.

Q: How do I get the $1,000 “Seed” contribution? 

Children born between Jan 1, 2025 and December 31, 2028 are eligible for a $1,000 pilot program contribution from the federal government. To receive it, you must “opt in” by filing IRS Form 4547, which you can complete on your 2025 tax return.

Q: What are the contribution limits?

The annual limit is $5,000 (indexed for inflation), and can be funded from multiple sources:

-Individual contributions (from parents, grandparents and friends): are made after-tax.

-Employer contributions: A major perk! Employers can contribute up to $2,500 annually per-employee. These contributions are excluded from the employee’s taxable income.

-Charitable and state contributions: These contributions often do not count toward the $5,000 limit. 

Q: How is the money invested?

Funds must be invested in diversified U.S. equity index funds (like those tracking the S&P 500) with expense ratios capped at 0.10%

Q: When can funds be withdrawn? How will they be taxed?

No withdrawals are allowed until the child turns 18. At that point, the account belongs to the beneficiary and functions like a Traditional IRA. Funds can be withdrawn for specific qualified uses like higher education, a first-time home purchase or starting a small business.

While the account grows tax-deferred, taxes are due upon withdrawal:

-Individual contributions: Since contributions are made after-tax, only the earnings are taxed as ordinary income.

-Government/Employer Money: Since this portion was “pre-tax” money, the entire amount (principal + earnings) is taxed as ordinary income.

-Note: Non-qualified withdrawals before age 59 ½ may face a 10% penalty.

Q: Where can I open an account?

The Treasury Department will act as the central administrator initially via trumpaccounts.gov (expected to launch in mid-2026). Individuals may begin making contributions on July 4, 2026.

While the Treasury will manage the accounts early on, other financial institutions may eventually support the account requirements.

Q: Is this the right move for my family?

These are the kinds of questions we love to discuss!

-If you qualify for the $1,000 seed: It’s a no-brainer. Open the account. $1,000 invested at birth could theoretically grow to ~$150k by retirement (assuming an 8% annual return) without you ever adding another penny.

-Similarly, opening a Trump Account is attractive if your employer, State or any charitable organizations plans to make contributions. 

-If your primary goal is to fund higher education: a 529 account may still be superior. 529 accounts have higher contribution limits, more customized investment options and tax-free growth, whereas Trump account withdrawals are taxed as income. Plus, 529s now allow limited Roth IRA rollovers (up to $35k of unused funds, assuming the account meets the criteria.)

-If you want flexibility: A Custodial Account (UTMA/GMA) has no contribution limits, no “qualified use” restrictions and more expansive investment options. While it lacks the tax-deferral of a Trump Account, for some families custodial accounts may be more tax-efficient after taking into account “Kiddie Tax” and capital gains treatment. 

We’d love to discuss your specific situation with you in more detail, and are happy to help you navigate the options as you start your kids on a firm financial footing!