Should Parents Open “Trump Accounts” for Their Kids — or Is This Just Another Account to Forget?
Be sure to read to the end for a trivia question!
Don’t let $250 “trump” your bigger priorities
A new type of account is about to enter the personal finance ecosystem: Trump accounts. The name alone has generated plenty of attention, but for parents, the more important question is whether these accounts actually make sense as part of a broader financial plan.
Like most tax-advantaged vehicles, the answer is it depends. Understanding how these accounts work—and how they compare to existing options—matters before opening yet another account you’ll be responsible for tracking over the next two decades.
Overview of Trump Accounts
Trump accounts are designed to jumpstart retirement savings for children, even before they have earned income.
Here are the key features:
Eligibility
Trump accounts can be opened for any individual under age 18 with a Social Security number.
Unlike IRAs or 401(k)s, the child does not need earned income for contributions to be made.
Access restrictions before age 18
Contributions cannot be withdrawn prior to the child’s 18th birthday, regardless of purpose.
Treatment after age 18
Once the child turns 18, the account functions similarly to an IRA.
Funds generally cannot be withdrawn before age 59½ without penalty, unless a qualifying exception applies.
Tax treatment
Contributions made by a parent or other individual are not tax-deductible.
After the child reaches 18, the account can be rolled over to a traditional IRA or Roth IRA.
In that sense, it shares some DNA with a Backdoor Roth IRA strategy—though with important differences.
Investment restrictions
Contributions must be invested in a low-cost U.S. stock index fund.
There is no ability to select individual stocks or alternative investments.
Federal seed money
The federal government will deposit $1,000 into Trump accounts created for children born between 2025 and 2028.
How accounts are opened
Accounts are established by filing Form 4547.
The form is currently in draft status.
If finalized in time, it can be filed with your tax return. Otherwise, an online portal is expected to open in Summer 2026.
Pros, Cons, and Alternatives to Trump Accounts
Before opening a Trump account, it helps to compare it to the alternatives most parents already use.
The main alternatives
529 plans
UTMA / UGMA accounts
529 plans
Typically the best tool for education expenses.
Withdrawals for qualified education costs are tax-free.
Contributions are state-tax deductible in many states.
Far more tax-efficient than a Trump account for college savings.
UTMA / UGMA accounts
Much more flexible.
Funds can be used for any purpose without penalty.
The tradeoff is loss of parental control once the child reaches the age of majority.
Where Trump accounts fall short
In theory, Trump accounts are a clever way to start saving for a child’s retirement decades in advance. In practice, there are two major drawbacks:
Control at age 18
Once accessible, the funds belong to the child.
Whether the money goes toward long-term investing—or an albino alligator or a trip to Burning Man—is entirely out of the parents’ hands.
Tax inefficiency, and potentially “kiddie tax” until age 24.
Growth is taxed at ordinary income rates.
If the child is a full-time student and remains your dependent, the income may be taxed at the parent’s rate once income exceeds a low threshold (this is also known as the “kiddie tax”). This potentially applies until they reach age 24.
Almost no financial professional would advise an adult to make nondeductible IRA contributions, let them grow for 23+ years, and only then convert to Roth.
Yet that is effectively what a Trump account does.
Still, there is one very real upside.
Free money
Despite the drawbacks, it’s hard to ignore $1,000 of free money from Uncle Sam.
The Dell Foundation Contribution
Adding another wrinkle, the Dell Foundation has announced an additional incentive.
The foundation will contribute $250 to new Trump accounts.
Eligible recipients:
Children age 10 and under
Born between 2016 and 2024
(Children born in 2025 or later are already eligible for the $1,000 federal deposit.)
Income restriction:
The child must live in a ZIP code where median income is under $150,000.
This can be checked using Census data at
https://data.census.gov/
According to statements from the Dells:
Children older than 10 may still receive the $250 if funds remain available.
How Should Parents Act?
From a planning standpoint, parents generally have nothing to lose by opening an account if their child may be eligible for either:
the $1,000 federal contribution, or
the $250 Dell Foundation contribution.
A few practical considerations:
It remains unclear when Form 4547 will be finalized.
If the form isn’t available when you file your return, accounts can still be opened later through the expected online portal.
At a long-term 8% return:
$1,000 could grow to roughly $6,000 if it is invested until the child turns 24 (and no “kiddie tax” is due).
$250 could grow to roughly $1,500.
All growth would be taxable at ordinary income rates.
However, the child’s tax rate at age 24 is likely low, potentially even zero.
For most families:
A Trump account does not replace a 529 plan for college savings.
It might be funded in addition to a 529.
The real friction is administrative:
Opening an account
Tracking it for up to 24 years
Remembering yet another account alongside retirement plans, HSAs, brokerage accounts, and 529s
TaxSmart Takeaway
In my opinion, the juice is worth the squeeze if your child was born between 2025 and 2028 and qualifies for the $1,000 federal contribution.
If you were inclined to fund a Trump account on your own to give your child a head start on retirement savings, then opening one in 2026 makes sense.
But if the only reason you’re opening the account is to chase a one-time $250 contribution, it may not be worth the hassle—especially given that the funds are locked up until your child turns 18.
As with most tax planning, free money is appealing—but simplicity still has value.
Special Trivia Question!
If the child on a Trump account should pass away after turning 18, the account is treated similar to an inherited IRA. In most cases, it means the designated beneficiary must take Required Minimum Distributions and empty the account within ten years.
If the child were to unfortunately pass away before age 18, the entire account is treated as taxable income to the beneficiary in the year of death. In this respect, the inheritance rules are similar to which type of account?
A. Roth IRA
B. 529
C. 401k
D. HSA
Click here for the answer!