The White House’s recent announcement that more than 60 million of the nearly 70 million American children were automatically enrolled in Trump accounts likely surprised many U.S. parents, who are now responsible for claiming and managing those accounts on their children's behalf. Because Trump accounts are subject to different rules than other types of investment accounts and college savings plans, it is important that parents understand what Trump accounts are and how they operate before making decisions regarding their children’s accounts.
One key point parents must know is that Trump accounts were created as a tool to give children a head start on retirement savings, not to fund their education or pay other life expenses. After the account holder turns 18, Trump accounts are converted into traditional IRAs and subject to the same withdrawal rules, such as penalties for taking distributions before they reach 59 ½ years old.
The automatic enrollment of each American child under the age of 18 who has a Social Security number was conducted under temporary Treasury regulations the Trump administration released on Sept. 30. According to the regulations, children were identified as eligible for automatic enrollment by reviewing information reported on U.S. tax returns. The regulations provided little information on how those reviews were to be conducted.
Parents or guardians can claim their child’s account using the Trump Accounts App or going to TrumpAccounts.gov. They can also file IRS Form 4547, Trump Account Election(s), with the IRS using an ID.me account. Claiming a Trump Account allows account holders to receive a one-time $1,000 contribution for eligible children as well as contributions from their families, friends, and philanthropists.
What Are Trump Accounts?
Trump accounts were created under the 2025 One Big Beautiful Bill Act (OBBBA) as a tax-deferred retirement savings tool for U.S. citizens under 18. Funds in the accounts can’t be accessed until the account holder turns 18. While commonly called “Trump Accounts,” the accounts are officially Section 530A Individual Retirement Accounts (IRAs).
The OBBBA provides that each U.S. citizen born between Jan. 1, 2025, and Dec. 31, 2028, is eligible for a one-time $1,000 pilot program contribution to their Trump account from the federal government, regardless of their family’s income. Account holders must request the contribution using Form 4547.
Who Can Contribute to a Child’s Trump Account?
In addition to the federal pilot program contribution, parents, family members, and employers may contribute up to a combined $5,000 annually to a child’s account. Individual contributions are made on an after-tax basis, therefore there is no tax benefit for individuals making contributions to a child’s account. However, the U.S. Treasury Department has issued guidance allowing employees to make pre-tax contributions to their dependents' Trump accounts through employer cafeteria plans. Employers may make up to $2,500 annually in tax-free contributions to the accounts of their employees’ children.
While the account holder is under 18, funds in a Trump account may only be invested in low-cost index funds holding U.S. stocks and exchange-traded funds focused on investing in U.S. companies, such as the S&P 500 index. By default, funds are initially invested in the State Street SPDR Portfolio S&P 500 ETF. The accounts can’t invest in cash, money market funds, or individual stocks outside of philanthropic stock gifts that meet Treasury rules.
What Happens When My Child Turns 18?
On Jan. 1 of the year a child with a Trump account turns 18, the child becomes the account owner, and the account automatically converts to a traditional IRA. That means the account owner is free to choose from a wider range of investments, including individual stocks. The converted Trump accounts will also be subject to the withdrawal rules that apply to traditional IRAs, including:
- Funds withdrawn from the account before the account holder is age 59 ½ may be taxed as ordinary income.
- A 10% early withdrawal penalty may apply for withdrawals taken before the account holder is 59 ½.
- The account holder must begin taking required minimum distributions (RMDs) when they reach a specified age (currently 75 for individuals born after 1960).
Though Trump accounts are not designed for qualified higher educational expenses, when the account holder turns 18, they may use these funds to pay for their education without incurring the 10% penalties but they will have to pay income tax. The best option to save for a child’s education is still a 529 plan that allows for tax-free withdrawals to pay for qualified educational expenses.
Can Charitable Contributions Be Made to Trump Accounts?
In July of this year, the Treasury Department announced that it would allow charitable and philanthropic entities, corporations, and stockholder-formed foundations to make large contributions of stock in publicly traded companies to the Trump accounts of eligible children. Treasury guidelines require that distributions be made to at least 5,000 accounts in qualified areas and that the stock be held in the account for at least five years.
The contributed stock would be transferred to the Treasury Department and be contributed to the accounts of eligible children in a manner consistent with the donor’s instructions. Contributions made by a charity or philanthropy generally do not count toward the $5,000 annual contribution limit.
The most notable philanthropic contribution to Trump accounts so far is the $6.25 billion contribution Michael and Susan Dell made through their foundation. The funds will be used to give $250 to the Trump accounts of children who are 10 or younger and living in areas with a median household income of under $150,000.
Are Trump Accounts a ‘Backdoor to Privatizing Social Security’?
It has been widely reported that U.S. Treasury Secretary Scott Bessent likened Trump accounts to “a backdoor for privatizing Social Security” while speaking at a July 2025 event. He added that the accounts will make everyone a shareholder in the success of the U.S. economy.
Bessent later explained that the accounts will supplement Social Security payments and that the Trump administration was committed to protecting Social Security.
Should I Fund My Child’s Trump Account?
While every parent or guardian of a child eligible for the $1,000 pilot payment should set up a Trump account and request the payment, whether parents should contribute additional funds to the accounts is a more complicated question. Unfortunately, the limitations on how the funds in a Trump account may be used is likely to discourage many parents from investing their own money in the accounts.
Most parents of young children are more concerned with helping them pay for their education than funding their retirement. Those parents should focus on establishing and funding 529 accounts. Funds contributed to a 529 account also grow tax-free, but there is no penalty for withdrawing money to pay educational expenses and withdrawals are not taxed as income. Money pulled from a Trump account to pay educational expenses after the account holder who has turned 18 would be subject to both.
An additional issue with funding a Trump account is that the money will not be easily accessible if the child needs help with such things as buying a house or paying medical bills. Parents who want to provide their children with help covering life’s expenses should investigate other savings or investment options, such as a custodial account or custodial Roth IRA which allows an adult to manage assets owned by a child. Those options may allow for investments to produce a higher return than the limited investments available through Trump accounts and won’t subject their children to early distribution penalties.
However, if you are a parent, guardian, or family member of a child with a Trump account and want to give them a head start on funding their retirement, a Trump account is one to consider.
