Trump Accounts for Kids: Who Qualifies for the Free $1,000?

Not many parents look at a newborn and think about the baby’s retirement savings. But if they do, they may wish to open a Trump account, a new investment account for American citizens under the age of 18.

The account is in the child’s name and a parent acts as the sole custodian until the child reaches the age of 18. As much as $5,000 may be contributed to a Trump account each year. 

Very young children and their parents have the most to gain with Trump accounts. Eligible U.S.-citizen children born from Jan. 1, 2025, through Dec. 31, 2028, can receive a one-time $1,000 federal contribution to a Trump account if the required election is made.

Parents can start the process by making the Trump account election through IRS Form 4547 or the program’s online enrollment process. After the election is processed, Treasury or its account agent sends activation information for the account.

Launching on July 4th

According to Trumpaccounts.gov, invites to the Trump account will arrive in the coming weeks to those who sign up for the accounts and a launch of the accounts is scheduled for the Fourth of July. Parents should be aware that Trump accounts will not accept contributions until July 4.

“This is a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation. And they’ll really be getting a big jump on life,” President Trump wrote on the website for the new accounts.

Before a child turns 18, Trump account funds generally must be invested in eligible mutual funds or exchange-traded funds that track indexes made up primarily of U.S. companies. Parents can check how their investments are performing in the app. After the child reaches adulthood, the account is generally treated under traditional IRA rules.

Advantages of Trump Accounts

Patrick Yaghoobians, Founder and Financial Planner at Noor Financial Services, discussed  the advantages and disadvantages of Trump accounts with us.

Here’s a look at the advantages. Families get a head start on retirement savings for children and as mentioned children born between Jan. 1, 2025 and Dec. 31, 2028 get a free $1,000 deposit into a Trump account.  

In addition to parents, other family members may contribute to a Trump account. Employers also may make contributions to a Trump account and employers have their own $2,500 annual contribution limit. These employer contributions count toward a Trump account’s $5,000 annual contribution limit.

The Trump accounts also enjoy tax-deferred growth.

Disadvantages of Trump Accounts

Here’s a look at the disadvantages. With a Trump account, there are no withdrawals until the child turns 18 and the account has lower annual contribution limits. So it’s not a place for big annual investments.

Withdrawals before retirement age may trigger ordinary income taxes and a 10% early-withdrawal penalty, unless an exception applies.

A Trump account “functions very similarly to an IRA, meaning if the child needs access to the money after turning 18 and before they turn 59 ½, the withdrawals will not only be subject to ordinary income taxes, but also a 10% early withdrawal penalty,” Yaghoobians explained. 

Financial Advice for Parents Using Trump Accounts

Don’t put more money into a Trump account than a family can afford. 

“I would urge parents to make sure they are able to take care of their present day obligations first before funding one of these accounts,” Yaghoobians told us.

“If their employer is willing to make contributions as a perk, this could be a reason for getting an account setup and taking advantage of money that is not coming out of their own pockets.”

To build up retirement savings, a family should plan on keeping money in Trump accounts for as long as possible. 

“Since these accounts are designed for retirement, parents should know that any money put into the account will probably not be used for decades, or else it will potentially be subject to taxes and penalties,” Yaghoobians told us.

Other Investment Options for Parents 

“The new Trump accounts are designed as a jump start for retirement savings for kids, which is different compared to the two other types of accounts which were common before its arrival, 529s and custodial accounts,” Yaghoobians told us.

“If a parent is trying to make sure their kid’s education is taken care of, a 529 may be a better choice. On the other hand, if a parent wants more flexibility in how the money is used, a custodial account may be more fitting.”