Children born between January 1, 2025, and December 31, 2028, will automatically receive a $1,000 contribution from the federal government into a new type of child investment account known as a Trump Account, previously called the Invest America Account.
While most headlines focus on the $1,000 seed for newborns, Trump Accounts will be available to any child under age 18 starting July 1st, 2026.
That makes them relevant for millions of families, including those with older children and even teenagers.
Beyond the initial government contribution, Trump Accounts are designed to support ongoing family and employer contributions, offer tax-deferred investment growth, and potentially allow for certain tax-favored withdrawals after the age of 18.
In this guide, I’ll walk through how Trump Accounts are expected to work, what we still don’t know, and how they compare to 529 plans and UTMA accounts. Ultimately, while I like the concept, I’ll explain why, for now, Trump Accounts may not provide meaningful advantages for most middle- to upper-middle-income families.
Quick Summary of Trump Accounts
- Newborns Will Receive $1,000 Automatically. Children born between January 1, 2025, and December 31, 2028, will receive a $1,000 federal contribution into a Trump Account. Parents can open the account, or the government will do so if needed. The funds must be invested in a low-cost U.S. stock index fund with an expense ratio below 0.10%.
- The Contribution Limit is $5,000 Per Year, Per Child. Families and employers can contribute a combined $5,000 per child each year (which will be indexed for inflation). Employer contributions up to $2,500 are tax-deductible and not counted as income. Family contributions are made with after-tax dollars and don’t qualify for any federal tax break.
- Withdrawals Are Locked Until Age 18 and Taxed According to IRA Rules. The account is designed for long-term use, with no withdrawals allowed until the child turns 18 (except in rare hardship cases). After that, withdrawals follow traditional IRA rules: family contributions made with after-tax dollars can be withdrawn tax-free, but investment earnings, the $1,000 government seed, and employer contributions (plus their earnings) are taxed as ordinary income when withdrawn. Early withdrawals (before age 59½) of earnings and employer dollars may be subject to a 10% penalty unless used for qualified expenses such as education, a first-time home purchase (up to $10,000), or starting a business. The account grows tax-deferred, and all contributions and withdrawals must comply with IRA-like regulations, including required minimum distributions starting in later adulthood.
- Important Details Remain Unclear. Although the account has been described as a type of retirement account and generally follows IRA withdrawal rules, it is a unique program and not technically an IRA. For withdrawals made before age 59½, penalty-free access is allowed for IRS-defined “qualified expenses”—including higher education, first-time home purchase (up to $10,000), and small business startups. However, the government has not yet provided detailed guidance on what expenses will qualify within those categories.
UTMA vs 529 vs Trump Account: Key Differences
Most people are familiar with the basic idea behind 529 plans and UTMA accounts, but it’s worth revisiting how they work and why they offer meaningful tax advantages when comparing them to Trump Accounts.
| Feature | UTMA | 529 Plan | Trump Account |
| Purpose | General savings and investment. | Education-focused, with limited Roth IRA rollover up to $35,000. | Long-term savings with potential government seed. |
| Ownership | Controlled by the parent or guardian until the child reaches the age of majority, usually 18 or 21 depending on state law. | Owned and controlled by the adult who opens the account. | Child gains full control at age 18. |
| Contribution Limits | No official limits (gift tax rules apply). | Varies by state, often $300,000+ lifetime. | $5,000 per child per year, including employer and family contributions. |
| Tax Treatment | Taxable account with annual taxes on dividends and interest. Investment income above $2,600 subject to kiddie tax at parental rates until age 18/19. | Grows tax-free, withdrawals tax-free for education. Many states offer a tax deduction or credit on contributions. | Grows tax-deferred, withdrawals of earnings taxed as ordinary income. Government seed money and employer contributions are fully taxable upon withdrawal. |
| State Tax Benefits | None. | Many states offer deductions or credits. | None. |
| Use of Funds | Can be used for any purpose after age 18 or 21. Long-term capital gains may be taxed at 0% if the child has low taxable income. | Qualified education expenses (or Roth rollover up to $35,000 after 15 years). | Any purpose after age 18, but earnings subject to ordinary income tax and 10% penalty before age 59½ (with exceptions for education, first home, etc.). |
| Access Before Age 18 | Allowed with custodial approval. | Limited (K–12 up to $10K per year in some cases). | Not allowed. |
| Financial Aid Impact | Counts as a student asset and can reduce financial aid eligibility. | Considered a parent asset and has a minimal impact on financial aid eligibility. | Unknown (personal prediction would be student asset). |
| Investment Options | Full control. | Typically limited to plan menus. | Low-cost U.S. stock index funds. |
UTMA vs 529 vs Trump Account: Differences Worth Highlighting
While the comparison chart covers the basics, there are a few key differences worth calling out that may have a meaningful impact depending on your goals and financial situation.
- 529 Plans Offer Triple Tax Benefits. When used for qualified education expenses, 529 plans offer a rare combination: potential state tax deductions on contributions, tax-deferred growth, and tax-free withdrawals. For families who are confident in using the funds for education, this structure is hard to beat. Additionally, 529 plans are treated as parent assets on the FAFSA, so they have a much smaller impact on financial aid eligibility than UTMAs. I assume Trump Accounts are going to also be counted as student assets, which can reduce aid.
- 529 to Roth IRA Rollover Rules Are Clear and Favorable. Unlike the Trump Account, where future rollover options are still undefined, 529 plans now permit rollovers to a Roth IRA—up to a lifetime maximum of $35,000 per beneficiary—if the 529 account has been open for at least 15 years. The amount eligible for rollover each year is limited by the annual Roth IRA contribution cap, and only funds (and their earnings) contributed more than five years prior can be rolled over. The rollover must be made to a Roth IRA in the beneficiary’s name, and the beneficiary must have earned income at least equal to the rollover amount in the year of the transfer. This provides families a clear and flexible backup for unused 529 funds if they are not spent on education expenses.
- Parents Maintain Greater Control with 529s and UTMAs. With 529 plans, the account owner retains full control over how and when the funds are used—even after the child turns 18. You could transfer to another child, for example. UTMAs transfer to the child at the age of majority (either 18 or 21). Trump Accounts, in contrast, become the child’s property at age 18.
- UTMAs Can Offer Tax-Efficient Withdrawals After Age 18. While UTMAs are taxable accounts subject to annual taxes on dividends and interest, they can still achieve significant tax efficiency through strategic timing. During the child’s minority, investment income above $2,600 (in 2025) is subject to the kiddie tax at parental rates. However, once the child takes control of the account—typically at age 18 or 21—they can strategically realize capital gains during low-income years. If their taxable income is low, they may pay 0% in long-term capital gains tax. For instance, in 2025, single filers with taxable income under approximately $47,025 fall into the 0% long-term capital gains bracket. This means that most students or part-time workers can gain tax-free access to appreciated investments, even when the money isn’t used for education.
- Trump Accounts Offer a Unique Benefit for Self-Employed Business Owners. One advantage that stands out with Trump Accounts is the ability for employers to contribute up to $2,500 per child, per year. Employer contributions are not considered income to the parent and may be deductible as a business expense.
Why I’m Not Saving Up To Contribute Just Yet
There’s a lot of excitement surrounding the new Trump Accounts.
The compound interest, when you’re starting to invest from birth, gets quite compelling. For example, even the initial $1,000 federal contribution alone, left untouched, could grow into $100,000 or more over 60 years at 8%.
If as a parent you invest $100 a month until your child turns 18, that money then sits untouched for another 50 years, that amount grows to $2,983,701.50. Adjusted for 3% inflation, that’s roughly $400,000 in today’s dollars.
Of course, having this type of compounding requires your child to sit on this account for decades. Something that’s hard to do, no matter your age.
The Big Unknown: Rollover and Withdrawal Rules
More importantly, there are still several unknowns. The biggest one for me is how rollovers or qualified withdrawals will be handled.
For example, if these accounts allow for Roth IRA rollovers without being subject to annual contribution limits, they become far more compelling.
What I’m also waiting to see is clear guidance on tax-favored withdrawals for things like buying a home, paying for college, or starting a business. Right now, these are mentioned in the legislation as exceptions to the 10% penalty, but we don’t yet have full clarity.
Why 529 Plans Still Have the Edge
Even with the new features of Trump Accounts, a 529 plan remains one of the most effective tax-advantaged strategies available.
When used for qualified education expenses, 529 plans offer a rare combination of benefits: tax-deferred growth, tax-free withdrawals, and, in many states, a deduction or credit on contributions.
If the funds are not needed for college, a recent rule change allows rollovers into a Roth IRA.
This provides a strong backup option, although it comes with important limitations.
The account must be open for at least 15 years, contributions from the past five years cannot be rolled over, and rollovers are still subject to annual Roth contribution limits.
From a financial aid standpoint, 529 plans are considered a parent asset. This typically has a smaller impact on aid eligibility than accounts owned by the student, such as UTMAs or possibly Trump Accounts, depending on future classification.
Why I Still Like UTMAs
UTMA accounts offer valuable long-term planning opportunities that are often overlooked. While they do not grow tax-deferred, they benefit from favorable capital gains treatment once the child reaches the age of majority.
Prior to age 18 (or up to 24 if the child is a full-time student and a dependent), investment income above a modest threshold is subject to the kiddie tax and taxed at the parent’s rate.
After that point, however, gains are taxed at the child’s individual rate, and for students with low income, that often means qualifying for the 0% long-term capital gains rate.
With careful planning, this creates a powerful strategy.
For example, a college student who earns $7,000 from a summer+part-time job can contribute the full amount to a Roth IRA. To free up that cash, they could sell investments in their UTMA account, realize capital gains that fall within the 0% bracket, and use the proceeds to fund the Roth.
This moves money from a taxable custodial account into a tax-free retirement account, without incurring tax on the gains.
Compared to a Trump Account, where all earnings are taxed as ordinary income and no qualified tax-free rollovers have been defined, this approach offers more flexibility and better long-term tax efficiency for families with planning capacity.
If you’re exploring how to help your child build long-term wealth, here’s a deeper look at how to start investing for teens.
Who Might Benefit Most from Trump Accounts?
For families who have already contributed significantly to 529 plans and other tax-advantaged accounts, Trump Accounts could serve as another savings vehicle for long-term wealth transfer goals.
While the tax treatment is less favorable, the ability to grow assets tax-deferred still offers value, particularly when other accounts are capped or income-restricted.
Self-employed parents may find a unique benefit here.
Employer contributions of up to $2,500 per child per year can be treated as deductible business expenses. While this doesn’t increase personal retirement savings, it allows business owners to shift funds to their child’s account in a tax-efficient way.
Still, for many high-income families, the primary objective is often to get money into a Roth IRA.
If a child has earned income, a custodial Roth IRA offers unmatched long-term benefits. An UTMA can also play a role in building tax-efficient wealth, especially when investment gains fall within the 0% long-term capital gains bracket.
However, once those tools have been fully utilized, a Trump Account may offer a modest additional benefit — especially if future guidance allows for Roth conversions or qualified tax-free withdrawals for life goals like education or a first home.
Until then, it may serve as a long-term backup tool rather than a first-choice savings vehicle for most.
Bottom line: Trump Accounts provide meaningful benefits for lower-income families and may offer strategic opportunities for high earners, especially those who are self-employed. But for most middle-income families, 529 plans and UTMAs remain the more flexible and tax-efficient options.
