Any child under the age of 18 in the U.S. with a valid social security number can open a Trump Account starting next year, leading financial advisors to start fielding questions from clients on how these accounts differ from existing options to support their children’s financial future.
Trump Accounts must be opened by a parent or guardian and come with annual deposit limits of $5,000 for individuals and $2,500 for employers contributing to the account of an employee’s child. The accounts, acting similarly to an IRA, must be invested in mutual funds or index funds that track broad equity benchmarks such as the S&P 500. Eligible funds cannot charge more than 0.10% in annual fees.
For children born between January 1, 2025, and December 31, 2028, the U.S. Treasury will make a one-time deposit of $1,000. Contributions to Trump Accounts cannot be made before July 4, 2026, and funds can't be withdrawn before the child turns 18.
“We’ve had some questions from clients on the new Trump Accounts, wondering how these are different than other account types available to them. One thing we’ve been reiterating is the importance of signing up for it to receive the free $1,000 deposit from the Treasury. It’s free money- no brainer,” said Dan Bennett, founder of Florida-based Lake Water Advisory, which claimed roughly $60 million AUM per its latest Form ADV.
Beyond accepting the free $1,000 deposit from the government, advisors generally see more upside from existing UTMA (Uniform Transfers to Minors Act) accounts and 529 plans designed to fund education. Both options have higher contributions limits than Trump Accounts and come with different tax structures.
“The current contribution limit for a Trump Account is the smallest of all, and while taxes are deferred each year, the tax benefits upon withdrawal might be poor compared to an UTMA or 529 plan,” said Andrew Herzog, advisor at Texas-based RIA The Watchman Group. “If a family with a newborn had to choose one account, the UTMA or 529 account would probably be best for flexibility, eligibility, and contribution limits. I myself am treating my children' s 529 accounts as education savings first, followed by retirement savings, and no annual taxes to worry about.”
Herzog added that he’s “expecting a lot of interest from clients, but maybe less than half will actually open,” a Trump Account. Contributions with the Trump Account are non-deductible while also being taxed as ordinary income after age 18 when funds are withdrawn.
“Brokerage accounts in the parent’s name, ear-marked for the kids, provide greater flexibility with contributions, withdrawals and investment options while providing greater tax advantages over the Trump Account,” said Bennett. “If parents are looking strictly for educational purposes, the 529 provides more advantages from a tax perspective. They can contribute more to a 529 than the Trump account while benefiting from tax free growth and tax-free withdrawals for qualified education expenses.”
Still, the Trump Account concept of encouraging compound investing from birth is one all advisors can get behind. “The core features of these [Trump] accounts are features that advisors have been requesting for decades,” said Ohio-based Lakehouse Family Wealth advisor Benjamin Simerly.
“We already have accounts designed for education, for healthcare, and for other uses. But there has not been an account type directly targeted at facility retirement-specific savings for children. Sure, there are investment accounts for children, but they are not targeted at the purpose of retirement, and do not come with any unique tax benefits like the Trump accounts,” added Simerly.
Billionaire philanthropists Michael and Susan Dell announced they will pledge $6.25 billion towards Trump Accounts, putting $250 into each account for at least 25 million U.S. Children aged 10 and under who were born before January 2025 and live in zip codes where median income is under $150,000 will be eligible for the Dell’s deposit.
"We have a brewing retirement crisis in America, with many retirees having less than $50,000 saved for retirement. Part of the issue is that by the time many Americans have excess money to save, they are nearing retirement," said Simerly. "The key advantage of Trump accounts is that the money will have potentially 5-7 decades to grow, as opposed to 5-7 years."
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