Everything you need to know about Trump Accounts

Key takeaways: Trump Accounts are a new financial tool designed to help families save for their children’s future needs, offering tax advantages and financial readiness. Benefits teams need to understand this account option for children so they can prepare for benefits discussions and explore employer contributions.

• Trump Accounts offer a tax-advantaged way to help families plan for their children’s future expenses, similar to traditional individual retirement arrangements (IRAs).
• Trump Accounts and Health Savings Accounts (HSAs) have different tax advantages and use cases.¹
• Employers have an opportunity to contribute to Trump Accounts within Internal Revenue Service (IRS) limits as a means of attracting and retaining talent.

Financial wellbeing is a big part of any modern benefits strategy. Benefits teams want to provide programs that help families save for retirement, healthcare, and dependent care.

Recently, the federal government introduced a new tax-advantaged option for families to build long-term financial security for minors. Trump Accounts allow families to open investment accounts with pre-tax dollars for minor children.²

Read on to discover the details of this new savings program, how it operates, and what it means for your employee benefits strategy.

What are Trump Accounts?

Trump Accounts are a new financial tool that function essentially as a traditional individual retirement arrangement (IRA) for minors. A parent or guardian acts as the custodian to manage the funds, while the dependent child remains the actual owner of the account.

These savings vehicles provide a structured way to put money aside for a young person to use for retirement, and they are designed for long-term growth. The money automatically goes into low-fee, exchange-traded funds or mutual funds that mirror the broader stock market’s performance.³

Starting July 4th, 2026, parents can contribute up to $5,000 per year⁴ to a Trump Account, slightly lower than the $7,500 annual limit for traditional IRAs.⁵ Employers can contribute tax-free to the Trump Accounts of their employees’ dependents or children up to $2,500 annually, which counts against the $5,000 limit. However, charities and local/state governments are also able to contribute tax-free to a child’s account, and these won’t count towards the annual limit.

The federal government will also directly contribute a one-time, $1,000 tax credit directly to a child’s account, but this only applies to U.S. citizens born between January 1st, 2025 and December 31st, 2028.

Trump Accounts are subject to a “growth period,” which applies to all accounts prior to the start of the year in which the child will turn 18. During this time, the account funds must be invested in a diversified index fund of domestic stocks, and the fund must limit fees and expenses. Once the growth period is over, the same Internal Revenue Service (IRS) rules that govern traditional IRAs apply to Trump Accounts.

How did Trump Accounts come about?

Trump Accounts were established as part of the One Big Beautiful Bill Act (OBBBA) in July 2025 as a way to encourage families to save for their children’s future.⁶ The program officially launches on July 4, 2026.

The accounts may become popular due to the $1,000 seed being offered by the federal government, and because of their tax-advantaged status. The legislation essentially establishes these accounts as a third form of an IRA.

What is the difference between Trump Accounts, Traditional IRAs and Roth IRAs?

1. Traditional IRAs allow people to save pre-tax dollars for and pay taxes when withdrawn or accessed during retirement. There is no minimum age, but the account holder must have earned income.
2. Roth IRAs allow people to save post-tax dollars and grow them in investments without paying additional taxes when withdrawn or accessed during retirement. There is no minimum age, but the account holder must have earned income.
3. Trump Accounts allow people to save pre-tax dollars for minor children, and they are set up as Traditional IRAs with taxes due upon withdrawals. However, once a child reaches the age of 18, they may choose to convert their Trump Account to a Roth IRA. The account holder does not need to have earned income.

Who can open a Trump Account?

Any U.S. citizen under the age of 18 is eligible for a Trump Account. A qualified parent or guardian simply needs to complete a specific tax document, known as IRS Form 4547. The account must be opened in the year before the child turns 18 due to the rules around growth periods. Additionally, the child must also have a work-authorized Social Security Number to qualify.

Families can submit this form during their normal tax filing process. Alternatively, they can visit the official government website to set it up. Filing this paperwork is also the required step to claim the $1,000 government seed contribution, which is only available to children born between January 1st, 2025 and December 31st, 2028.

How can you spend or invest the funds in a Trump Account?

Because they function similarly to traditional IRAs, all Trump Account contributions happen on a pre-tax basis. Consequently, any money taken out of the plan will be subject to standard income taxes.

Parents and guardians can open the accounts and make contributions on behalf of their dependent children, but the child is a sole beneficiary of the account. Before the beneficiary turns 18, the funds must be invested in eligible funds. The law defines these as “mutual funds or exchange traded funds,” and specifies that they must track either the S&P 500 or another index tracking the returns of “equity investments in primary United States companies.”

Families cannot choose just any investments, stocks, or mutual funds. Trump Accounts are designed to deliver returns consistent with the general market, and as a vehicle for investing in U.S. companies.

When it comes to spending, Trump Accounts are limited. They are meant for long-term savings, and are subject to many of the same rules and early withdrawal penalties as traditional IRAs. We’ll dive into this in more depth later in the article.

What employers and benefits teams need to know about Trump Accounts

Employee benefits leaders may be interested in Trump Accounts as a way to boost employee financial wellness⁷ and offer tax-free contributions to employees’ dependent children.

Employers have the option to make direct pre-tax deposits into a dependent’s plan. Employers can contribute up to $2,500 annually per employee with tax benefits for both the company and the employee similar to that of a retirement account.⁴ If an employee has two or more dependent children, the employer contribution could be divided equally among the accounts. These employer contributions do not count as taxable income for the parent, and they are deductible for employers, just like Health Savings Account (HSA) contributions.

Who administers Trump Accounts?

The law did not initially establish rules governing who should administer these accounts on behalf of children and their parents or guardians. However, in April 2026 the Treasury Department announced that The Bank of New York Mellon Corporation (BNY) along with investment platform Robinhood would be the initial trustees for these accounts.⁸

It’s still unclear if Trump Accounts will be available from other investment account providers besides BNY and Robinhood. If additional 401k, IRA and HSA providers are allowed to administer these accounts at some point in the future, employers may find themselves evaluating their options, structuring their plans, and tailoring their contributions as they do with other retirement benefits or healthcare savings programs.

What are eligible expenses for Trump Accounts?

Withdrawals from Trump Accounts will be treated very much like they are for other IRA accounts. In general, if someone withdraws from a traditional IRA before age 59½, they will pay early withdrawal penalties and taxes on the amount they withdraw. However, for both traditional IRAs and Trump Accounts, there are qualifying expenses that will not incur a penalty:

• Higher education
• Certain qualified medical expenses
• Health insurance premiums (if unemployed)
• Purchase or construction of a first home
• Birth or adoption of a child
• A personal emergency ($1,000 annual limit)

What is the difference between HSAs and Trump Accounts?

Like an HSA, you can use Trump Account funds for qualified medical expenses. However, you will need to pay taxes on the withdrawal. Trump Account holders may choose to use these funds as an emergency option for unexpected, expensive medical care when they don’t have enough saved in an HSA.

Also like HSAs, Trump Accounts will allow withdrawals for health insurance premiums when the account holder is unemployed, such as on a COBRA continuing coverage plan. If used for everyday premiums, both account types may incur both a penalty and tax bill.
HSAs can be used for everyday healthcare expenses for children much more readily than Trump Accounts without tax penalties, provided the child is a tax dependent. Pediatrician visits, prescription medication, urgent care x-rays, and other common healthcare expenses are all quick and easy to pay with an HSA debit card.

Like Trump Accounts and other retirement vehicles, HSA dollars can also be invested in the market. Employees can invest their HSA funds as long as they spend the HSA dollars on qualified medical expenses, they will never pay tax on that money. The contributions are pre-tax, the distributions are tax-free, and the investment growth is also tax-free as long as it’s used for healthcare.

Trump Accounts are an interesting new option for employers looking to invest in employee financial wellbeing. While the program is still very new, it has the potential to be another way for employers to boost financial readiness and attract and retain talent.