A new financial tool introduced this year is the so-called “Trump Account”. These are new government-created tax-advantaged accounts for any child under the age of 18. Details are still emerging, as they aren’t actually scheduled to be opened until July of this year, so permit me a bit of leeway on the specifics. The IRS will give guidance on some of the finer points in the coming weeks and months.
At its basic structure, a Trump account is an IRA (Individual Retirement Arrangement) for a child. They’re owned by the child and controlled by an authorized adult (parent or guardian in most cases).
There has been some confusion as to who is eligible to own these accounts. Any child who is under 18 and has a valid social security number is eligible to have a Trump account. The confusion arises from an initial governmental “seed” investment just for kids born between January 1, 2025 and December 31, 2028. Kids born in that window get a free $1,000 to populate the account when their parents elect to open the account. While kids born outside the window don’t get the seed money, they can still have an account.
$5,000 per year can be put into the account, and the contributions are after-tax. That $5,000 can come from anyone and split any way from various contributors. Employers can even contribute, adding up to $2,500 per year in the accounts. Recently several benefactors have announced their own contributions for eligible children, but those vary widely. Make sure you do some research or have your advisor do some as well as to who might be contributing and how much they might contribute.
Initially they will be hosted by the U.S. Treasury with a partnership with BNY and Robinhood. As long as the child is under 18, there are some rules as to how it’s invested. The money must be invested in low-cost index mutual funds or ETF’s (see Blog | Paducah Financial Consultants for a description of those vehicles). No individual stocks, alternative investments, or cryptocurrencies are allowed. No money can be taken from the account prior to the child’s age 18 for any reason except for death of the beneficiary.
After the child turns 18, the account immediately becomes a traditional IRA with the same rules and restrictions as any other IRA account. There is some speculation that it might be able to be converted to a Roth IRA. Stay tuned for news on that front in the coming months as the IRS gives us more guidance.
OK, so boring details out of the way, what’s so interesting about these accounts? This is the first time the federal government has seeded any account for anyone, which is extremely interesting and an attractive idea for those eligible. It’s also the first time we can fund retirement accounts without any related earned income requirements. The hope is that by funding these accounts for kids, they can take advantage of the value of compound interest over decades to help get a head start on their own retirement. These accounts are NOT designed to replace education accounts like 529 plans. They’re designed to give a child a head start on a long-term goal, using low-cost investments and some free money to do so.
Here’s the website to file for the account to be opened for your child. Trump Account Election Form - IRS Form 4547. This essentially indicates your interest in opening the account, and you’ll be contacted prior to July 5th, 2026 by a trustee to get the account going.
As always, you can find this and many other articles about sound financial planning on our website, www.paducahfinancialconsultants.com. Just click on the “blog” section and the entire library is at your fingertips.
(Internal Revenue Service, 2026)
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.