Understanding Trump Accounts: Building a Nest Egg for the Next Generations
Key Points – Understanding Trump Accounts: Building a Nest Egg for the Next Generations
- What Are Trump Accounts?
- How Do They Work?
- Contributions to Trump Accounts Can Begin on July 4, 2026
- Trump Accounts vs. 529s
- 4-Minute Read | 10-Minute Watch
What Are Trump Accounts?
July 4, 2026, will mark the one-year anniversary of the One Big Beautiful Bill Act. Independence Day will also be the first day that Trump Accounts, which were established as part of the OBBBA, can be funded.1 But what are Trump accounts? The IRS just issued guidance on Trump accounts in December, so let’s explain what they are and who they’re for.2
Per the IRS Notice 2025-68, Trump accounts are “a type of traditional individual retirement account (IRA) that is established for the exclusive benefit of an eligible individual and that is designated at its establishment as a Trump account.”3 Trump accounts are designed to help with giving children a jump start with saving for retirement. These accounts can be opened for eligible children when filing your 2025 tax return via Form 4547.4, 5
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Who Is Eligible to Be a Beneficiary of a Trump Account?
Any child that’s born in the United States and has a Social Security number that’s under the age of 18 is eligible to be a beneficiary of a Trump account. And for those who are born between January 1, 2025, and December 31, 2028, the federal government is making an automatic one-time $1,000 contribution to start up their Trump accounts.
Contributions to Trump Accounts: Who Can Contribute and How Much Per Year?
While parents and legal guardians are eligible to open Trump accounts for their children, other family members, friends, employers, and philanthropic donors (ex: Michael and Susan Dell) can cumulatively contribute a maximum of $5,000 per year on an after-tax basis per beneficiary.6 The annual contribution limit for employers is $2,500 per employee, which would count toward the $5,000 limit per beneficiary.7 However, the $1,000 one-time contribution from the federal government won’t count toward the $5,000 annual limit.
According to trumpaccounts.gov, Trump account funds “will be invested in a diversified portfolio of low-cost index funds designed to maximize long-term growth while minimizing risk.8”
The Growth Period and Distribution Rules
The moment the account is established through December 31 of the year before the beneficiary turns 18 is the growth period for Trump accounts.9 During that timeframe, there’s one primary for beneficiaries to follow (pending a few exceptions): don’t take distributions from the account. The only exceptions to take distributions during the growth period are:
- Qualified rollovers to another Trump account
- Qualified rollovers to an ABLE account at age 17
- Corrections of excess contributions
- If the beneficiary passes away
Once the growth period ends (January 1 of the year the beneficiary turns 18), the same distribution rules that apply to IRAs typically will apply to Trump accounts. Withdrawals prior to 59½ will be subject to a 10% penalty aside from a few exceptions. Examples of those exceptions include qualified withdrawals for higher education expenses and the beneficiary’s first home purchase).
Can You Convert a Trump Account to a Roth IRA?
While Trump accounts are designed to jumpstart children with saving for retirement, it’s important to education them on how to manage the account once the growth period ends. For example, let’s say that a Trump account grows to $2 million by the time the beneficiary wants to retire. They need to understand that that $2 million hasn’t been taxed yet and that qualified withdrawals will be taxed at ordinary income tax rates.
To help with creating tax diversification, a Trump account may be converted to a Roth IRA.10 Remember that when doing a Roth conversion, ordinary income tax must be paid on the converted funds in the year they’re converted, but the earnings growth and distributions for Roth IRAs are tax-free under certain conditions.
However, don’t forget about the Kiddie Tax if you’re thinking about converting a Trump account to a Roth IRA, as it could come into play.11 The Kiddie Tax is a law that specifies the treatment of investment and unearned income for dependent children who are 18 and under or full-time college students between the ages of 19 and 23.12
RMDs for Trump Accounts
Additionally, planning for Required Minimum Distributions is critical for Trump accounts. You can’t just let your Trump account grow and grow and grow, not take withdrawals, and let it transfer to your child, grandchild, or other beneficiary. The required beginning date for RMDs is currently April 1 of the year after attaining age 73. RMD age is set to go up to age 75 by 2033. Inherited IRA rules apply for Trump accounts as well if the original child beneficiary passes away after turning 18.
Trump Accounts vs. 529s and Custodial Accounts
So, should you establish a Trump account for your child, grandchild, or other eligible beneficiary and start funding it when first eligible on July 4, 2026? As with so many other financial planning considerations, it depends on your unique situation. 529 accounts might be an option to consider to help pay for a child’s education, and they can also be rolled over to a Roth IRA. However, there are some key differences to keep in mind between Trump accounts when comparing them to 529s and custodial accounts. See below in Figure 1 for a breakdown from Advisor Perspectives.
FIGURE 1 – Trump Accounts vs. 529s vs. Custodial Accounts – Advisor Perspectives13
Do You Have Any Questions About Trump Accounts?
If you want to start funding a Trump account for a beneficiary right away on July 4, 2026, make sure to complete Form 4547 when filing your 2025 tax return. According to TrumpAccounts.gov, accounts can eventually be established via an online portal as well, but that might not be until summer 2026.
If you have questions about Trump accounts and whether they make sense for you want to learn more about other key components of the One Big Beautiful Bill Act, start a conversation with our team below.
Deciding whether to utilize a Trump account or other savings vehicle to build generational wealth is a big decision that could have a big impact on your family’s financial future. We look forward to walking through those types of decisions with you to help you enjoy today with confidence for tomorrow.
Resources Mentioned in This Article
- The One Big Beautiful Bill Act: What You Need to Know
- Investing for Grandchildren: The Trump Account
- IRA RMD Requirements
- 2026 Tax Brackets: IRS Makes Inflation Adjustments
- What Is Tax Diversification?
- Roth Conversion Strategies Under the Big Beautiful Bill
- How Does a Roth IRA Grow?
- How to Reduce RMDs with 5 Strategies
- What’s Your Required Beginning Date for RMDs?
- Reviewing RMD Rules as IRS Issues Final SECURE Act Regulations
- What Are the Rules for RMDs on Inherited IRAs?
- 529 Plans and Planning for Your Family’s Future
- 529 Rollover to a Roth IRA — What You Need to Know
- Generational Wealth Management
Other Sources
[3] https://www.irs.gov/pub/irs-drop/n-25-68.pdf
[4, 8] https://www.trumpaccounts.gov/
[5, 9] https://www.irs.gov/pub/irs-pdf/f4547.pdf
[6] https://www.bbc.com/news/articles/cyvgq184vgqo
[10] https://irahelp.com/irs-addresses-unanswered-questions-about-trump-accounts/
[12] https://www.irs.gov/taxtopics/tc553
Investment advisory services offered through Modern Wealth Management, Inc., a Registered Investment Adviser.
The views expressed represent the opinion of Modern Wealth Management, a Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.