A clear starting point for families.

Trump Accounts are a type of traditional individual retirement account (IRA) for eligible children. The child needs a valid Social Security number and must be under 18 at the end of the year in which the election is made. Citizenship is not required for the account itself.

An authorized adult completes Form 4547 or an official online election. The instructions identify who may sign: generally a legal guardian, parent, adult sibling, or grandparent, in that order when requesting only an account. Requesting the federal deposit has a different authorization test. After the election, follow the official activation instructions and any trustee requirements.

• Family and other ordinary contributions: together with qualifying employer contributions, these generally share a $5,000 annual limit per child during the growth period. Inflation adjustments begin after 2027.
• Employer benefit: a qualifying written employer program can exclude up to $2,500 per employee annually from the employee’s income. This is not a separate allowance for each child; it also counts toward the receiving account’s $5,000 limit.
• Federal deposit: eligible U.S. citizens born January 1, 2025 through December 31, 2028 may receive $1,000. The person making this election must expect the child to be their qualifying dependent. It does not count toward the $5,000 limit.
• Qualified general contributions: certain government and 501(c)(3) programs use a separate framework. These are not the same as a donor’s direct gift to one child and do not count toward the ordinary annual limit.

The child does not need earned income during the growth period. Coordinate contributions from all sources with the trustee; unused annual room does not carry forward.

During the growth period, investments are limited to eligible mutual funds or exchange-traded funds that track an index of primarily U.S. companies, do not use leverage, and meet the program’s other requirements. Annual fund fees and expenses cannot exceed 0.10%.

Individual stocks, bonds, and actively managed funds are not eligible during this period. A low fee does not eliminate investment risk: stock markets fluctuate and account balances can decline. Most ordinary IRA investment rules apply after the growth period ends.

The growth period ends on December 31 of the year before the child turns 18. During that period, ordinary withdrawals are prohibited. Limited exceptions include qualifying trustee-to-trustee transfers, a qualifying ABLE rollover in the year the child turns 17, correction of excess contributions, and the beneficiary’s death. There is no general hardship withdrawal.

Starting January 1 of the year the child turns 18, most traditional IRA distribution rules apply. The taxable portion of a withdrawal is generally ordinary income. An additional 10% early-distribution tax may apply before age 59½ unless an exception applies. An education or first-home exception can remove that additional tax without eliminating income tax.

A Roth conversion may be available after the growth period, but it can create taxable income. Review the consequences with a qualified tax professional rather than assuming conversion is automatically beneficial.

Ordinary after-tax contributions from the child, family, or other individuals generally create “basis”: amounts that have already been taxed. Individuals cannot deduct these contributions during the growth period. The federal deposit, qualifying employer contributions, and qualified general contributions do not create basis.

Investment earnings are tax-deferred, not automatically tax-free. When distributions begin, basis and taxable amounts are generally allocated under IRA rules; a withdrawal is not simply treated as taking out the family’s contributions first. Keep contribution records and consult current IRS instructions.

A Roth IRA has different tax rules. Converting later does not make all earlier contributions or earnings tax-free retroactively.

• 529 plan: designed for education, with federal tax advantages for qualifying expenses. State rules, investment options, and nonqualified withdrawal consequences matter.
• Custodial account (UTMA/UGMA): an adult manages assets for a minor. The assets belong to the child, tax treatment differs from an IRA, and control transfers under applicable state law.
• Roth IRA for a child: generally requires eligible compensation. Contribution and withdrawal rules differ from this federal child savings program.

There is no single best account for every family. Compare the intended use, access to funds, taxes, financial-aid treatment, investment choices, and the child’s circumstances. A qualified adviser can help evaluate how different accounts work together.

• Access: the account is not an emergency fund during the growth period.
• Market risk: eligible stock index funds can lose value, including near the transition to adulthood.
• Taxes: the federal deposit and investment growth are not automatically tax-free when withdrawn.
• Administration: the election, activation, contribution coordination, and recordkeeping are separate tasks.
• Other benefits: financial aid and means-tested programs have their own rules. Check with the relevant office before relying on an assumption.

Start by reading the official requirements and understanding your goals. This guide does not recommend a particular contribution amount, account combination, or tax strategy.