What families need to know about the new federal children’s savings accounts that opened for contributions on July 4, 2026.
Trump Accounts are a new type of tax-advantaged savings account created for children, established under 2025 federal tax legislation. Structurally, each account functions much like a traditional IRA: it is held in the child’s name, grows tax-deferred, and is invested in a limited menu of low-cost index funds until the child reaches adulthood. Below is an overview of how the accounts work, how the money is taxed, and how they stack up against more familiar savings vehicles.
How the Money Is Invested
Investment choices inside a Trump Account are intentionally limited. Funds may only be placed in low-cost mutual funds or ETFs tracking a broad U.S. equity index (such as the S&P 500), with at least 90% invested in U.S. companies, an expense ratio capped at 0.10%, and no use of leverage. Once the child turns 18, these restrictions lift and the account can be invested the same way as a traditional IRA.
Taxes and Withdrawals
Growth inside the account compounds tax-deferred. Funds generally cannot be withdrawn before January 1 of the year the child turns 18; after that, the account is treated like a traditional IRA. Withdrawals before age 59½ are generally subject to ordinary income tax plus a 10% penalty, though standard IRA exceptions (such as qualified higher-education expenses or a first-home purchase) can apply. One nuance worth noting: only private, out-of-pocket contributions (from parents, grandparents, or the child) come back out tax-free. The federal $1,000 seed deposit, employer contributions, and all investment earnings are fully taxable as ordinary income when withdrawn.
At its core, an IRA that begins at birth. Where it fits depends on your family's broader plan.
How Trump Accounts Compare
Trump Accounts, 529 plans, custodial Roth IRAs, and UTMA accounts each serve a different purpose, and many families will use more than one. The table below highlights the key differences.
Things Families Are Weighing
- Trump Accounts require no earned income and no active decision-making: the $1,000 seed deposit and simple index investing make them a low-effort complement to other savings, not a replacement for education- or retirement-focused accounts.
- Because every non-personal dollar (the seed deposit, employer contributions, and all growth) is taxed as ordinary income on withdrawal, the accounts are less tax-efficient than a 529 used for education or a Roth IRA funded with a child’s earned income.
- Funds are locked until the child turns 18, and the account converts to a traditional IRA at that point, so families should plan around this as a long horizon, retirement-oriented account.
Every family's circumstances are different, and a Trump Account is only one piece of a broader wealth strategy. Speak with your Evolve advisor to see how it fits into your family's plan.
Emily C. Smith, CFP®, CEPA®
Director of Wealth Strategy
Because Trump Accounts must be heavily invested in equity index funds during childhood, they are subject to market volatility and loss of principal, as the beneficiary approaches age 18. Evolve Private Wealth LLC is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Evolve Private Wealth and its representatives are properly licensed or exempt from licensure. The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.