Trump Accounts Overview

Trump Accounts officially opened this month for millions of children under the age of eighteen.  Trump Accounts (TAs), which were introduced under the One, Big, Beautiful Bill Act (OBBBA) began rolling out on July 4, 2026.

What are Trump Accounts?

TAs are a new tax-deferred investment vehicle, like Individual Retirement Accounts (IRAs) but designed specifically for minors under the age of eighteen.  The focused objective is to kick-start a child’s retirement savings as early as birth.  This can provide years of additional compounding compared to traditional IRAs.  What differentiates these “starter retirement accounts” to traditional retirement accounts are the rules surrounding the first 18 years, or growth period. 

Eligibility & Account Registration

Trump Accounts are now available to anyone under the age of eighteen.  Accounts can be opened on behalf of the designated beneficiary by a parent or legal guardian by filing IRS Form 4547 with their tax return or online (https://trumpaccounts.gov/).  Unlike 529 accounts, only one TA can be active at any given time and must be opened by the beneficiaries authorized individual.  Authorized individuals fall under the following hierarchy:

1. Guardian
2. Parent
3. Adult Sibling
4. Grandparent

Growth Period

During the growth period, which lasts from the inception of the account until January 1 of the year the beneficiary turns eighteen, no withdrawals are allowed.

Custodian

Account opening is already underway and will be custodied at BNY or Robinhood.  There is high likelihood that these accounts can be moved to other custodians in the future.

Initial Funding

For children born in years between January 1, 2025 & December 31, 2028, the U.S. Government will provide a $1,000 deposit to fund the account as part of a pilot program.  There have also been several charitable organizations and companies that have agreed to make starter contributions.   

Contributions

Outside of the pilot program[1], ongoing annual contributions can come from several sources, but may not exceed $5,000/yr:

• Direct Contributions (anyone)
• Employer – up to $2,500/yr per employee (not beneficiary).  Federally tax-deductible to employer (States may differ).  Contributions cannot discriminate in favor of highly compensated employees.
• Qualified General Contribution – Charitable Organizations or Government Entities can contribute to beneficiaries within a qualified geographic area.

Annually, contributions cannot exceed $5,000/account.  This number is expected to be adjusted for inflation beginning in 2028.  Unlike IRAs, contributions must be made by 12/31 of the contribution year (not 4/15).

Tax Treatment of Contributions

Unlike traditional IRAs, contributions to Trump Accounts are not tax-deductible.  Contributions are treated as “basis” which must be tracked over-time.  

Investments

The investment lineup within TA’s has been intentionally selected to be passive long-term investments with low expense ratios (less than 0.10%).  Authorized Individuals will be able to select from several mutual/index funds that track major US indices.  Currently accounts are invested in SPYM, an S&P 500 Index Fund.

Post Growth Period

On January 1st of the year the beneficiary turns eighteen, the account operates as and can be rolled into an IRA.  Investments continue to grow tax-deferred, and distributions are subject to ordinary income along with a 10% penalty.  Penalty exceptions apply for educational expenses, first time home-buyer allowances (up to $10k) and birth/adoption expenses (up to $5k).  Distributions for any of the previous exceptions are still subject to ordinary income taxes.

Tracking the basis will be essential, because a portion of all distributions will be the basis (contributions during growth period) and earnings.  Distributions will be a “pro-rata” amount of basis and earnings, with the basis considered tax free and earnings taxed as ordinary income and subject to penalties before age 59 ½.     

Financial Planning Implications and Alternative Options

Roth Conversions

Trump Accounts are by design intended to be used as a vehicle to kick-start a child’s retirement savings.  This differs from traditional vehicles like 529’s (education) and UTMA’s (accessible savings), which are used at earlier stages of life.  The biggest planning opportunity for TA’s is when the child is no longer subject to “Kiddie Tax” (24 and older) and low earned income.  Converting during this period will likely yield the greatest results from Roth Conversions by allowing for years of compounding while taking advantage of low tax rates.  This is subject to a case-by-case basis.

529 Accounts

Section 529 Plans will remain the primary savings vehicle for most parents and beneficiaries.  529’s offer tax-deferred growth and tax-free withdrawals for qualified education expenses.  Withdrawal limits have been expanded up to $20,000/yr for K-12 education and have no limits for higher education.  Additionally, these accounts often offer state income tax deductions (state dependent) for contributors and have recently expanded to allow for conversions to Roth IRAs[2].  With education costs rising faster than average inflation and expanded use of 529’s in recent years, 529’s will remain the first “bucket” to fill for savings.  

UTMAs

Uniform Transfers to Minors Act, commonly known as UTMA accounts, are also a convenient vehicle for investing for minors until they are adults.  UTMA accounts are custodial brokerage accounts that are converted to the minor’s name upon reaching the age of majority (18, 21, or 25) depending on their state.  Unlike 529’s and Trump Accounts, these accounts do not have any tax advantages but have little to no limitations as it relates to distributions.  These are common vehicles to help children save early on for a home, starting a business, or getting a head start early in their adult life. 

Parent Owned Account

Lastly, parents investing assets in their name and gifting them in the future remains another alternative, like UTMA’s.  Instead of the young adult receiving assets outright in their name upon reaching the age of majority, parents can instead elect to gift assets “designated” for them when they feel the intended beneficiary is responsible to manage the assets on their own or have a need.

Summary

The rollout of Trump Accounts releases the newest tool in the financial planning toolbox.  These accounts are intended to help young children supercharge and kickstart their retirement savings at an early age.  The growth period offers up to an 18-year window for contributions and compounding to establish a retirement nest egg.  With the power of compounding and maximizing annual contributions of $5,000, this nest egg could grow to the hundreds of thousands by the time the child is 18, and into the millions when the child is 65.[3]  For those able to help young ones save at an early age, utilizing Roth conversions in the beneficiaries early 20’s will likely be a key strategy depending on income.

At a high level, Trump Accounts can be a valuable tool, but it is important for parents and other contributors to prioritize savings based on goals & needs.

For parents, saving for their own retirement should remain priority and future education second.  At a minimum, parents of children born between 2025 to 2028 should open and receive the $1,000 pilot contribution from the government.  Regardless of account type, parents should educate their children on the purpose and consequences of early distributions.

Please feel free to reach out to our team if you have questions.  We also encourage you to share this update with friends, family or colleagues who might benefit from our insights.  If you know someone interested in an introduction to Kavar Capital Partners, please feel free to forward this email or connect them with our team directly. 

Jack Faerber, CFP®

Wealth Advisor

Sources

1. Trump Accounts – (https://trumpaccounts.gov/)
2. US Congress – (https://www.congress.gov/crs-product/R48910)
3. Fidelity – (https://www.fidelity.com/learning-center/personal-finance/trump-accounts)
4. Fidelity – (https://www.fidelity.com/learning-center/personal-finance/custodial-account-for-kids)
5. Kitces – (https://www.kitces.com/blog/taxable-accounts-custodial-kiddie-tax-obbba-trump-accounts-one-big-beautiful-act-roth-rmd-529-plan/)
6. JP Morgan – (https://am.jpmorgan.com/us/en/asset-management/adv/investment-strategies/529-college-savings-plan/529-or-trump-account-the-answer-for-newborns-is-both/)

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[1] The $1,000 pilot program contribution does not count towards $5,000 annual limit.

[2] Lifetime limit of $35,000 can be converted to Roth IRA, must have earned income and subject to annual contribution limits.  Additional rules apply.

[3] This example is for illustrative purposes only and does not represent the performance of any security.  Consider your current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this.  The assumed rate of return used in this example is not guaranteed.  

Important Disclosures:

The views expressed herein are of Jack Faerber on July 9th, 2026 and are subject to change at any time based on market or other conditions, as are statements of financial market trends, which are based on current market conditions. This information is provided as a service to clients and friends of Kavar Capital Partners, LLC solely for their own use and information. Kavar Capital Partners is not an insurance broker. The information provided is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as, investment, legal or tax advice. Past performance does not ensure future results. Kavar Capital Partners, LLC makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information. The information is subject to change and, although based on information that Kavar Capital Partners, LLC considers reliable, it is not guaranteed as to accuracy or completeness. This information may become outdated and we are not obligated to update any information or opinions contained herein. Articles may not necessarily reflect the investment position or the strategies of our firm.