Glossary
The jargon, decoded.
12 plain-English definitions for the terms that come up most.
529 plan
A tax-advantaged education savings plan. Higher contribution limits than a Trump Account and tax-free withdrawals for qualified education costs, but no free government seed money.
ABLE account
A tax-advantaged account for people with qualifying disabilities. A 17-year-old can roll a Trump Account into one as a special exception to the usual no-withdrawals-before-18 rule.
Basis
The portion of an account's balance that comes back out tax-free when withdrawn. In a Trump Account, only a parent's own after-tax contributions count as basis — the $1,000 federal deposit and investment earnings don't.
Custodial account (UTMA/UGMA)
An account an adult manages on behalf of a minor, with full control transferring to the child at the age of majority (18–25, depending on the state). No contribution ceiling, but no free seed money and generally weighted more heavily on the FAFSA than a Trump Account.
Expense ratio
The annual fee a fund charges, as a percentage of assets. Trump Account investments are capped by law at 0.10% — low compared to many retail investment products.
FAFSA
The Free Application for Federal Student Aid. Whether — and how much — a Trump Account counts against a student's aid eligibility is still unsettled as of September 2026; the Department of Education hasn't issued final guidance.
Growth period
The years before a beneficiary turns 18, when a Trump Account is restricted to a narrow set of low-cost index funds and withdrawals are essentially locked.
Index fund
A fund that tracks a broad market benchmark (like the S&P 500) rather than picking individual stocks. It's the only kind of investment a Trump Account can legally hold during the growth period.
Required Minimum Distribution (RMD)
The mandatory annual withdrawal the IRS requires starting at age 73 under current law, once a Trump Account has become a traditional IRA.
Rollover
Moving funds from one tax-advantaged account to another without triggering taxes or penalties — for example, a 17-year-old rolling a Trump Account into an ABLE account.
Roth conversion
Voluntarily paying tax now to convert traditional IRA funds into a Roth IRA, so future qualified withdrawals are tax-free. Often advantageous right around age 18, when a young adult's tax bracket is typically at its lowest.
Traditional IRA
The type of retirement account a Trump Account automatically converts into on January 1 of the year the child turns 18, unlocking normal IRA investment and withdrawal rules.