The Trump Savings Account for Kids (OBBBA 2025): What Parents Should Know

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) became law. One headline feature is a new, IRA-style account for children under 18—popularly called the Trump Savings Account. It borrows many rules from the traditional IRA but runs on its own, kid-specific rulebook until the year your child turns 18. Then, it converts and follows the standard traditional IRA rules.

Quick Basics

• Who’s eligible? Children under age 18 (U.S. citizens with SSNs). A federal pilot seeds $1,000 at birth for children born Jan 1, 2025–Dec 31, 2028 (timing and mechanics via Treasury/IRS guidance). 

• When do accounts actually open? Statutory rollout begins on/after July 4, 2026; you can’t open a “real” Trump Account before then. 

• How much can go in? Up to $5,000/year total from family and others, with employers allowed up to $2,500 of that amount as a non-taxable employee benefit. 

• How does it change at 18? It becomes a traditional IRA; from that year forward it follows standard IRA rules (contribution deadlines/limits, distribution rules, etc.). 

Why this account can be helpful

1. Free $1,000 for qualifying newborns (2025–2028)

   That seed—plus any family/employer contributions—can compound for decades. 

2. No earned-income requirement

   Unlike IRAs, kids don’t need wages for contributions. You can start in the year they’re born. 

3. Employer help

   Up to $2,500 per year from an employer isn’t taxable income to the family at contribution time. 

4. Tax-deferred growth

   Earnings grow tax-deferred (like a traditional IRA). 

…and why it might not be ideal

• No contributions before July 4, 2026

  
  

  Early marketing isn’t the real thing; wait for IRS/Treasury and participating custodians. 

• Taxation upon withdrawal

  Distributions are taxed as ordinary income (and may face 10% early-withdrawal penalty before 59½ unless an exception applies). For some families, 529 plans or custodial accounts can be more tax-efficient for education or flexible savings. 

• More limited timeline & evolving guidance

  Pilot benefits (the $1,000 seed) are limited to 2025–2028 births, and some administrative details are still being clarified by IRS/Treasury. 

How to sign up (what to expect)

1. Get/confirm your child’s SSN (needed for eligibility). 

2. Watch for Treasury/IRS guidance and participating institutions—accounts are slated to be available starting July 4, 2026 through authorized banks/brokerages; for eligible newborns, Treasury may auto-enroll or coordinate the $1,000 deposit once an account exists. 

3. Open and fund the account once custodians go live; employers can contribute via benefits platforms once plans are set up. 

Contribution limits & deadlines

• Annual limit: Up to $5,000 per child per calendar year from all sources combined (employer portion capped at $2,500). 

• Deadline while the child is <18: December 31 of the contribution year (unlike IRAs, which usually allow funding up to Tax Day). 

• After conversion at 18: The account is a traditional IRA and follows standard IRA deadlines/limits. (For reference, IRA limits/timelines are set annually by the IRS.) 

When can distributions be made?

• Before the calendar year the child turns 18: No withdrawals are allowed. 

• Starting in the year the child turns 18: The account is treated as a traditional IRA. Standard early-withdrawal rules apply—generally, distributions before 59½ face a 10% penalty unless an IRS exception applies (e.g., certain higher-education costs, disability, first-home purchase caps, and a few others per IRS rules). 

How are distributions taxed?

• Ordinary income tax on withdrawals (like a traditional IRA).

• 10% additional tax may apply to early distributions (before 59½) unless an exception applies; report exceptions/penalties on Form 5329 if needed. 

How much can be invested each year? What age can you start?

• Up to $5,000/year total contributions per child while under 18; employers may cover up to $2,500 of that. Investments will be offered by the custodian (expect index-fund options; specifics to come via guidance). Contributions can start at birth—no earned income required. 

Trump Account vs. Roth IRA for Minors

Trump Account vs. Roth IRA for Minors

Feature	Trump Account (pre-18)	Roth IRA for Minors
Start requirement	No earned income required; can start at birth	Earned income required for contributions
Tax treatment going in	Contributions are after-tax and not deductiblebefore 18	Contributions are after-tax (no deduction)
Growth	Tax-deferred before 18; converts to traditional IRA at 18	Tax-free growth if qualified
Withdrawals	Taxed as ordinary income; early-withdrawal penalty rules apply after conversion	Qualified withdrawals are tax-free; earnings before 59½ may face 10% penalty unless exception
Deadlines	Dec 31 for contributions while child <18	Typically Tax Day of the following year
Annual limits	$5,000/year (employer up to $2,500) while <18	Follows IRA annual limit (and limited by the child’s earned income)

The Trump Savings Account is a new, tax-deferred on-ramp for kids’ long-term investing—especially compelling if you can capture the $1,000 newborn seed and/or employer contributions. But because withdrawals are taxable later (and possibly penalized early), families focused on education might still prefer 529 plans for tax-free education withdrawals, while teens with jobs may want Roth IRAs for lifelong tax-free growth. As with any new program, watch for IRS/Treasury guidance and your bank/broker’s rollout in 2026. 

What can you invest in?

• Broad market index funds & ETFs (e.g., total-U.S. or S&P 500 trackers). Several explainers note the menu centers on diversified, U.S.-focused funds similar to what you’d see in a basic IRA or 401(k). 

• Cash equivalents (money-market/settlement funds) are typically available for short-term balances. Contributions must be in cash; you can’t transfer securities in-kind. 

Why mostly index funds? The program is designed to be simple, low-fee, and broadly diversified—more “set-and-forget,” less day-trading. 

Is there a default option?

• Expect a default “age-based” or target-date option that automatically dials down risk as the child gets older (common in IRA/401(k) settings). While details vary by provider, major financial firms describe the accounts as market-based with IRA-like menus and auto-options likely at launch. 

Can parents pick funds themselves?

• Yes—within the custodian’s list. You (the custodian on the child’s behalf) can choose among the available index funds/ETFs and can change selections over time (rebalancing permitted, trading windows and mutual-fund rules apply). 

Anything that’s not allowed?

• You should assume IRA-style restrictions: no margin, no collectibles, no personal use assets. Crypto, options, or narrowly concentrated bets are not part of the standard menu described so far. (Providers say the lineup will mirror simple IRA menus.) 

Who chooses the lineup?

• The financial institution (bank/broker) that offers the account. The federal rules define the type of account; menus, fees, and the default fund are set by the provider and disclosed in their materials. Treasury/IRS are expected to issue operational guidance that custodians will follow. I

Fees

• Like an IRA, you’ll see fund expense ratios (typically low for index funds) and potentially small account/admin fees depending on the provider. Because the program emphasizes low-cost, broad funds, the all-in expense can be quite modest when using index options. 

Practical setup (investment side)

1. Open the account at a participating custodian once live. (Rollout begins in 2026, per official timelines.) 

2. Pick the default (target-date) or build a simple 1–3-fund mix (e.g., total-U.S. stock index + total-U.S. bond index).

3. Revisit annually (birthday check-in) to keep risk aligned with age and contributions on track.

A starter lineup you can copy (once your provider opens enrollment)

• Single-fund, autopilot: the custodian’s age-based/target-date index fund.

• Two-fund core:

  • Total U.S. Stock Market Index (60–90% while very young)

  • Total U.S. Bond Market Index (10–40%, increasing gradually each year)

• Three-fund core (if available):

  • Total U.S. Stock Index

  • Total International Stock Index (10–20% of equities)

  • Total U.S. Bond Index

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