Trump Accounts (7/26/2025)
The Evolution of Trump Accounts
Over the past few months I’ve dedicated a few newsletters to the “One Big Beautiful Bill”, highlighting some of the bigger tax changes that had been under consideration and some which were subsequently signed into law earlier this month. One item that I chose not to write about previously are Trump accounts, which are a new type of investment account designed to help parents save for their children’s future. Now that we have a bit more clarity I’m going to break down the evolution of the account and explain how we can expect to be able to begin to use it starting in 2026.
You may remember seeing news or social media back in the spring about President Trump's desire to financially incentivize Americans to have more children, going as far as referring to himself as the “fertilization president.” 🤢*pause while nausea subsides* In an effort to address the declining birth rate in the U.S., the administration was floating the idea of a “$5,000 baby bonus”, where the government would compensate mothers for each new baby they have, theoretically to alleviate the financial burden of raising a child (absolutely hysterical to those of us who know the actual cost of labor & delivery and childcare in this country.)
Rather than a flat-out incentive, the idea of creating a savings account was pursued and included in the first draft of the OBBB. Initially branded as “Money Accounts for Growth and Advancement” (MAGA Accounts) 🙄, the plan evolved beyond a cash bonus into tax‑advantaged savings accounts. These would be seeded with $1,000, instead of $5,000 at birth. In addition to the initial seed funds from the government, parents would be able to fund the accounts with up to $5.000 a year and the funds would grow tax‑deferred, like an IRA. Withdrawals would be restricted to purposes like education, homeownership, or entrepreneurship once the child turned age 18.
At this point the financial assistance to parents had been eliminated. There is no access to the funds until the child turns 18, so the money cannot be used to offset the cost of having the baby or raising the child. The pivot positioned the accounts to serve as an education savings vehicle, similar to a 529, but with MAGA branding.
As the Senate updated many provisions of the bill, the specifics of the new account evolved further. Flexibility to use the funds for education, a home purchase or to start a business have been eliminated. The account is basically a “starter” IRA, and will officially convert into a Traditional IRA when the child turns 18. Funds cannot be accessed prior to 18 for any reason. Once the child turns 18, withdrawals can be made but will incur taxes and penalties until the child/account owner reaches age 59.5, at which point withdrawals will be subject to taxes only.
So let’s break this down:
no financial relief for parents
no access to funds for at least 18 years
only children born between 1/1/25-12/31/28 are eligible for the $1,000 seeded by the government (other criteria must be met as well)
penalties and taxes on withdrawals at age 18 when the account converts into an IRA
Not exactly helpful to low-income families or anyone who is choosing not to have children due to financial constraints, but the account could be a helpful tool for affluent families who want to save for their children’s retirement or remove assets from their estate.
Trump accounts will effectively be “starter IRAs” and allow parents (and some entities, like a parent’s employer) to make contributions for children from birth to age 18. (IRAs can only be funded for a child today if the child has earned income, so Trump accounts do have a funding advantage.) The contributions will not be tax-deductible like an IRA contribution can be, and funding is limited to $5,000/year, unlike 529’s, which have no annual funding limit and can be used for a variety of purposes to support your child and their education even prior to reaching college age.
There’s still more clarity to come about how these accounts will operate and need to be administered, but I wanted to provide some background and clarity on what we do know so far. The earliest you would be able to open and fund one of these accounts would be after July 4th, 2026, 1 year from when the bill was signed into law, assuming any financial institution is prepared to support them by then.
TL;DR - Trump made a campaign promise to help parents financially combat the cost of raising children, but what the OBBB created is effectively an account that primarily benefits wealthy Americans.
If you want to save for your child’s education, a 529 account is still your best option.
If you or your family want to give assets to your minor child, an UTMA or UGMA account continues to provide more flexibility and tax advantages than a Trump account will.
If you are looking to remove assets from your estate or specifically save for your child’s retirement, a Trump account will be a new option available to you as early as July 2026.
