The New Retirement Savings Account for Kids

What should you know about Trump Accounts?

By: Anna R. Myers Norton, Esq. 

A recent federal law has introduced a new tax-advantaged savings account for minors. These accounts, known as Trump Accounts, are designed to help children start saving early for retirement with the help of their parents, employers, and others.

This article provides a general overview of Trump Accounts and how they are compare to other savings accounts for children. 

What is a Trump Account?

A Trump Account is a tax-deferred investment account available for individuals under age 18. Funds in the account grow tax-deferred while the beneficiary is a minor. When the beneficiary turns 18, the Trump Account is converted into a traditional Individual Retirement Account (IRA) owned by the beneficiary.

When can withdrawals be made? 

Withdrawals cannot be taken prior to the beneficiary turning 18.  After the Trump Account is converted to a traditional IRA, account funds may be distributed in accordance with IRS rules, including a penalty-free distribution for a first-time home purchase.

Who may contribute to the account?

It is anticipated that anyone (parents, relatives, friends, or employers) may contribute to a Trump Account until the child turns 18. The total annual contribution limit is $5,000, and contributions may begin in July 2026.

What should employers know?

Employers may contribute up to $2,500 toward the $5,000 cap on behalf of their employee (if under 18) or an employee’s dependent. In 2026, employer contributions will be excluded from the employee’s gross income. 

Are contributions tax deductible?

No. Contributions are not tax deductible.

Are contributions subject to gift tax?

Yes. Contributions made to a Trump Account are considered gifts to the minor account owner and count toward the contributor’s annual gift tax exclusion.

How is a Trump Account invested?

Trump Accounts may only be invested in a low-cost, diversified fund that tracks a U.S. stock index, such as the S&P 500. This does not apply after the account is converted to a traditional IRA.  

How is a Trump Account established?

It is anticipated that for every child born between 2025 and 2028 with a social security number, the federal government will establish a Trump Account for that child if an election is made. Further details regarding this election process are expected later, including how accounts will be created for children born prior to 2025.

How does the government contribution work? 

The federal government will make a one-time $1,000 contribution to Trump Accounts for children born between 2025 and 2028. Importantly, this federal contribution does not count toward the annual contribution limit of $5,000, and there is no requirement to match the government’s contribution.

How is it different than a custodial IRA?

Parents or guardians may establish and contribute to a custodial IRA for individuals under age 18 to the extent the minor individual has earned income. In contrast, Trump Accounts do not require that the minor have earned income to receive contributions.

How is it different than a 529 Plan?

A 529 Plan is designed to help save for a child’s education, offering tax-free growth and withdrawals for qualified expenses. A Trump Account, by contrast, is intended for long-term retirement savings. 

Although a recent change in the law allows 529 Plan funds to be rolled over into a Roth IRA, that rollover is limited to $35,000.  A Trump Account has potentially a greater opportunity to save for a child’s retirement. 

How is it different from a UTMA account?

Trump Accounts are similar to custodial investment accounts under the Uniform Transfers to Minors Act (UTMA) in that both are funded with after-tax dollars. However, unlike traditional custodial accounts, investment income in a Trump Account is not realized until funds are withdrawn by the beneficiary, subject to standard IRA rules.

As additional details of Trump Accounts continue to take shape, understanding how this new savings vehicle fits into your broader financial and estate planning strategy is important. These accounts present an exciting opportunity for early retirement savings, and professional guidance can help ensure you make the most of the benefits available. To learn how a Trump Account could work for you or your family, contact Anna R. Myers Norton at 518-584-5205 or online at oalaw.com. 

Anna R. Myers Norton is an associate attorney with O’Connell and Aronowitz, One Court Street, Saratoga Springs, New York. Anna’s practice focuses on trust and estate law, including estate planning, estate administration, and guardianship.