Glossary

Money contributed to an account from income that has already been taxed. Trump Account contributions are after-tax — there is no upfront tax deduction. The benefit is tax-deferred growth rather than an immediate tax break. Contrast with pre-tax contributions (e.g., to a traditional 401k), which reduce your taxable income in the year you contribute.

A unit for expressing small percentages in finance. One basis point equals 0.01%, or one one-hundredth of a percent. The Trump Account expense ratio cap is 10 basis points (0.10%). If you see a fund described as "5 bps," that means a 0.05% annual fee.

The person designated to receive an account's assets if the account holder dies. For a Trump Account (and later the IRA it converts to), the account holder should name a beneficiary. After the account converts to a Traditional IRA at age 18, standard IRA beneficiary rules apply — including the 10-year rule for non-spouse inherited IRAs.

The profit from selling an asset (such as a stock or fund) for more than you paid for it. Short-term capital gains (assets held less than one year) are taxed as ordinary income. Long-term capital gains (assets held more than one year) are taxed at preferential rates of 0%, 15%, or 20% depending on income. Trump Account withdrawals are taxed as ordinary income — not at capital gains rates — which is one reason custodial accounts can sometimes be more tax-efficient.

The process by which investment returns generate their own returns over time. If $1,000 grows 8% in year one ($80), it starts year two at $1,080 — so 8% in year two earns $86.40, not just $80. Over decades, this "interest on interest" effect becomes powerful. It is the core argument for opening a Trump Account at birth — a $1,000 deposit at birth has 65+ years to compound before retirement.

The maximum amount that can be deposited into a tax-advantaged account in a given year. Trump Accounts have a $5,000 annual limit for family/individual contributions (inflation-indexed after 2027), plus a separate $2,500 limit for employer contributions. Exceeding the limit may result in tax penalties.

An investment account opened by an adult (custodian) on behalf of a minor. Assets in the account legally belong to the child from the moment of contribution — gifts to custodial accounts are irrevocable. UGMA stands for Uniform Gifts to Minors Act; UTMA stands for Uniform Transfers to Minors Act. When the child reaches the age of majority (typically 18–21 depending on state), they take full control of the account with no restrictions on use.

A financial institution (bank, brokerage, or trust company) that holds and safeguards investment assets on behalf of an account holder. Trump Accounts will be held by IRS-approved custodians — financial institutions that meet the requirements to administer the accounts. Major brokerages like Fidelity and Vanguard are expected to serve as custodians.

A type of investment fund that holds a collection of assets (like stocks) and trades on a stock exchange like a single stock. ETFs are often used to track market indexes. For Trump Accounts, the permitted investments are ETFs or mutual funds that track broad U.S. stock market indexes, with expense ratios at or below 0.10%.

The annual fee charged by a mutual fund or ETF, expressed as a percentage of assets. An expense ratio of 0.10% means you pay $1 per year for every $1,000 invested. Trump Accounts cap the expense ratio at 0.10% — meaning only the lowest-cost index funds qualify. This protects account holders from high-fee funds that erode long-term returns.

The federal form used to determine eligibility for college financial aid. Different account types are treated differently on FAFSA: 529 plans owned by a parent are counted at a maximum 5.64% rate; UGMA/UTMA custodial accounts are counted as the student's asset at 20%; IRA assets (including a converted Trump Account) are generally not counted as assets on FAFSA, though distributions may be counted as income. FAFSA rules can change — verify current rules with your school's financial aid office.

A mutual fund or ETF designed to replicate the performance of a specific market index — such as the S&P 500 or the total U.S. stock market. Rather than a portfolio manager picking individual stocks, an index fund simply buys all (or a representative sample of) the stocks in the index. Index funds typically have very low expense ratios and have historically outperformed most actively managed funds over long time horizons. Trump Accounts are required to invest exclusively in qualifying U.S. stock index funds.

A tax-advantaged investment account for individuals. There are two main types: Traditional IRA (contributions may be deductible; growth is tax-deferred; withdrawals in retirement are taxed as income) and Roth IRA (contributions are after-tax; growth is tax-free; qualified withdrawals in retirement are tax-free). A Trump Account automatically converts to a Traditional IRA when the child turns 18.

The earlier working name for Trump Accounts during the legislative process. "MAGA" stood for Money Accounts for Growth and Advancement. The final enacted legislation settled on "Trump Accounts" as the official name. The two terms refer to the same financial product.

The federal legislation signed by President Trump on July 4, 2025, that created Trump Accounts. It is a broad tax and budget reconciliation law covering a wide range of fiscal policies. The Trump Account provisions are one part of this larger act.

Tax on income at your standard marginal income tax rate (as opposed to the lower preferential rates that apply to long-term capital gains and qualified dividends). Trump Account withdrawals — on earnings and on government/employer contributions — are taxed as ordinary income. This is one of the program's trade-offs compared to Roth accounts (tax-free) or custodial accounts (capital gains rates on appreciated assets).

The minimum amount the IRS requires you to withdraw from a tax-deferred retirement account each year, starting at age 73 (under current law). Because a Trump Account converts to a Traditional IRA at age 18, it will eventually be subject to RMD rules when the holder reaches the applicable age. Amounts not withdrawn by the deadline are subject to a significant penalty.

A type of individual retirement account where contributions are made with after-tax dollars, growth is tax-free, and qualified withdrawals in retirement are completely tax-free. A Roth IRA for a minor requires the child to have earned income. Unlike a Trump Account (which converts to a Traditional IRA), a Roth IRA offers tax-free — not just tax-deferred — growth. See the comparison page for more.

A stock market index that tracks the performance of 500 large U.S. companies across many industries. It is one of the most widely used benchmarks for the overall U.S. stock market. An S&P 500 index fund is one of the most common types of fund eligible for Trump Account investment, as it tracks a broad index of U.S. companies and is available from multiple providers at expense ratios well below the 0.10% cap.

A tax-advantaged savings account specifically designed for education expenses. Contributions grow tax-free, and withdrawals for qualified education expenses (tuition, fees, books, room and board) are also tax-free. Many states offer a state income tax deduction for contributions to that state's plan. High annual contribution limits (up to $95,000 via a 5-year gift tax election). See the comparison page for how 529s compare to Trump Accounts.

An account or investment that receives favorable tax treatment under federal (and sometimes state) law. Tax advantages can take several forms: an upfront deduction on contributions (traditional 401k, traditional IRA), tax-free growth (Roth IRA, 529 plan), tax-deferred growth (Traditional IRA, Trump Account), or some combination. Trump Accounts offer tax-deferred growth — no annual taxes while the money is in the account, but taxes owed upon withdrawal.

Growth that is not taxed until a later date — typically when the money is withdrawn. In a tax-deferred account like a Traditional IRA or Trump Account, dividends, interest, and gains accumulate without generating an annual tax bill. This allows the full pre-tax amount to compound over time. When you eventually withdraw, the distribution is taxed as ordinary income. Contrast with a regular brokerage account (taxed annually on dividends and realized gains) or a Roth account (tax-free at withdrawal).

An individual retirement account where growth is tax-deferred and withdrawals are taxed as ordinary income. Contributions may or may not be tax-deductible depending on your income and whether you have a workplace retirement plan. Trump Accounts automatically convert to Traditional IRAs when the child turns 18 — at that point, all standard Traditional IRA rules (contribution limits, withdrawal rules, RMDs, etc.) apply.

Taking money out of an investment or retirement account. In the context of Trump Accounts: no withdrawals are permitted before age 18. After the account converts to a Traditional IRA at 18, standard IRA distribution rules apply — ordinary income tax on taxable amounts, plus a 10% early withdrawal penalty for distributions before age 59½ unless a qualifying exception applies.