January 28, 2026
Trump Accounts Explained
By Chris Palabe, CFS, AIF®
Introduction
The One Big Beautiful Bill Act (OBBBA) established Trump Accounts, a new type of tax-deferred savings account designed specifically for children. Unlike traditional education or custodial accounts, Trump Accounts begin at birth, receive an automatic federal contribution for eligible newborns, and grow tax-deferred over time.
While the early start and compounding potential are compelling, these accounts introduce meaningful tax, control, and planning considerations that families should understand before relying on them as a primary savings vehicle.
1. What Is a Trump Account?
A Trump Account is a tax-deferred savings account created for eligible children under the OBBBA¹. For qualifying newborns, the federal government provides a one-time $1,000 contribution, allowing the account to begin compounding immediately.
The account is owned by the child and ultimately functions similarly to an IRA once the child reaches adulthood.
Planning note:
Trump Accounts are designed to encourage long-term asset accumulation starting at birth, but they come with fewer safeguards and less parental control than many existing planning tools.
2. Eligibility and Initial Funding
Children born between 2025 and 2028 who are U.S. citizens and have a valid Social Security number are eligible to receive the $1,000 federal deposit once the family opts in¹.
This contribution is made only once and does not count toward annual contribution limits.
3. Ongoing Contribution Rules
Families may contribute up to $5,000 per year, indexed for inflation². Contributions are made with after-tax dollars and are not deductible by parents, nor are they treated as taxable income to the child.
Employers may also contribute up to $2,500 per year, indexed for inflation, but employer contributions count toward the same $5,000 annual cap². Certain government entities and charitable organizations may make qualified general contributions as well.
All contributions must stop the year before the child turns 18.
Planning note:
While the contribution window is limited, the early start creates significant compounding potential if fully funded.
4. Who Can Contribute to a Trump Account?
Trump Accounts allow contributions from a broad range of individuals and entities, subject to the annual limits outlined above².
- Parents and Guardians: May contribute directly to their child’s Trump Account using after-tax dollars.
- Grandparents and Other Family Members: Relatives or other private individuals may also contribute, provided total annual contributions do not exceed the $5,000 limit.
- Employers: Employers may contribute up to $2,500 per year on behalf of an employee’s dependent child, with those contributions counting toward the annual cap.
- Government Entities and Charitable Organizations: Certain governmental bodies and qualified charities may make general contributions that do not count against the child’s annual $5,000 contribution limit.
Planning note:
The wide range of potential contributors increases flexibility but also requires careful coordination to avoid exceeding annual limits.
5. Access and Withdrawal Rules
At age 18, the child gains full legal control of the Trump Account, and the account begins to operate similarly to an IRA¹.
Withdrawals of earnings, employer contributions, and the original federal deposit are taxable, and if used for non-qualified purposes, are also subject to a 10% penalty, mirroring traditional IRA rules².
Qualified expenditures include:
- College or credentialing expenses
- Small business start-up or investment
- First-time home purchases
Planning note:
Once control transfers at age 18, parents have no ability to restrict withdrawals or investment decisions.
6. Strategic Planning Considerations
From a planning perspective, Trump Accounts function like an IRA that starts at birth, making them attractive for high-net-worth families focused on extremely long-term wealth accumulation.
According to Council of Economic Advisers projections, a Trump Account funded at the maximum contribution level could grow to approximately $303,800 by age 18 and $1.09 million by age 28, assuming historical average U.S. equity returns and consistent annual contributions³.
However, for many families, 529 plans and Roth IRAs (for working teens) may offer:
- More favorable tax treatment
- Broader qualified-use rules
- Continued parental control
Trump Accounts lack these features and may be best viewed as a supplemental—not primary—planning tool.
Key Takeaways
Trump Accounts may make sense for families who have already maximized other tax-advantaged strategies or for high-net-worth clients seeking early retirement funding for children or grandchildren. For most households, careful coordination with existing education, retirement, and estate-planning strategies is essential.
At Palabe Wealth, we help families evaluate how new tools like Trump Accounts fit within a disciplined, long-term financial plan—balancing opportunity with control, tax efficiency, and risk.
As always, Palabe Wealth is here to help. If you have any questions regarding your retirement plan, schedule a 15-minute introductory phone call by contacting us directly at (847) 249-6600.
References
- Internal Revenue Service, Summary of the One Big Beautiful Bill Act, July 2025.
- Congress.gov, Trump Account Contribution and Distribution Provisions, 2025.
- Council of Economic Advisers, Trump Account Growth Projections, 2025.
Disclosures
This material is for general informational purposes only and is not intended to provide specific tax, legal, or investment advice. Individuals should consult with their tax advisor, financial professional, or attorney regarding their unique circumstances. Past performance is no guarantee of future results. Investing involves risk, including possible loss of principal. Securities and advisory services offered through LPL Financial, a registered investment advisor and member FINRA/SIPC. Palabe Wealth and LPL Financial are separate entities.
Chris Palabe, CFS, AIF®
Chris Palabe is the CEO and a Financial Advisor at Palabe Wealth, a firm that provides exceptional expertise in the Financial Planning space. For over 25 years, he has cultivated a deep understanding of the complexities of wealth management and retirement planning, making him a valued advisor to both Plan Sponsors of 401(k) plans and Individual Investors.
Holding esteemed designations such as Certified Fund Specialist (CFS) and Accredited Investment Fiduciary (AIF), Chris showcases his commitment to upholding the highest standards of investment advice and fiduciary responsibility in his advisory relationships. These designations are a testament to his knowledge and dedication to providing clients with sophisticated and ethical financial guidance.
He holds his Series 6, 7, 63, and 65 licenses through LPL Financial, which qualify him to offer a broad range of financial products and services.
Chris’s distinguished career is characterized by his unwavering commitment to his clients' financial well-being. He focuses on crafting tailored strategies that aim to optimize retirement outcomes and financial independence. He continually strives to help the individuals he works with on their path towards financial success.
Over the years Chris has refined a consistent, strategic investment philosophy supported by a significant body of academic research. He believes that a widely diversified portfolio of investments tailored to each client’s unique risk tolerance and financial goals is the key to their financial success.
Beyond his professional achievements, Chris has a profound passion for dressage, a highly skilled form of horse riding performed in exhibition and competition. This discipline requires a remarkable level of dedication, precision, and harmony between rider and horse, qualities that mirror his approach to financial planning.
