How Trump Accounts Work

Step 1 — Eligibility

Trump Accounts are designed to be broadly accessible. Any child who meets the following criteria can have an account opened on their behalf:

• Age: The child must not have turned 18 before the end of the calendar year in which the account is opened.
• Social Security number: The child must have a valid U.S. Social Security number (SSN).
• Account opener: A parent, legal guardian, or other authorized adult opens and manages the account on the child's behalf until age 18.

The $1,000 federal contribution — additional eligibility

For a child to receive the one-time $1,000 government seed deposit, one additional condition applies:

• U.S. citizenship: The child must be a U.S. citizen.
• Birth window: The child must be born between January 1, 2025 and December 31, 2028.

Children born outside this window, or non-citizen children with SSNs, can still have a Trump Account opened and contributed to by family members — they simply do not receive the government seed deposit.

Step 2 — Opening the account

Opening a Trump Account is designed to be simple:

1. File Form 4547 — Check the Trump Account election box on this IRS form during normal annual tax filing. No separate application process is needed to claim the $1,000 government contribution.
2. Choose a qualified custodian — Once accounts go live on July 4, 2026, select a bank, brokerage, or financial institution that has been approved to administer Trump Accounts. Major custodians including Fidelity and Vanguard have announced plans to offer the accounts.
3. Provide child's SSN — The account is registered in the child's name and Social Security number from day one.
4. Government contribution is deposited automatically — For eligible children, the $1,000 federal seed contribution is deposited and invested directly, without additional action required from the family.

Step 3 — Making contributions

After the account is open, contributions can be made by multiple parties — but the total annual amount is capped.

Who can contribute

• Parents and guardians — can contribute at any time.
• Other family members and friends — grandparents, aunts, uncles, and others can contribute on the child's behalf.
• Employers — can contribute to a Trump Account for an employee's child through an employer-sponsored plan, up to $2,500 per year per child, separate from the family limit.

Annual contribution limits

Contributions are made with after-tax dollars (there is no upfront tax deduction, unlike a Traditional IRA or 401k contribution). The tax advantage is that growth inside the account is tax-deferred — meaning no annual taxes on dividends, interest, or capital gains while the money remains in the account.

Step 4 — How funds are invested

Trump Accounts have strict investment rules, by design. The law specifies that all funds must be invested in a narrow category of funds:

• U.S. stock index funds only — mutual funds or ETFs that track the performance of a broad index of primarily U.S. companies. The S&P 500 is the most common example.
• No leverage — funds that use borrowed money to amplify returns are not permitted.
• No sector or industry-specific funds — technology-only, energy-only, or thematic ETFs are excluded. The investment must be a broad market index.
• No cash or money market holdings — funds must be invested in equities, not held in cash equivalents.
• Expense ratio cap of 0.10% annually — this is extremely low. For context: a $10,000 balance would incur a maximum of $10 in annual fees. Most actively managed mutual funds charge 0.50%–1.5%. Many existing index funds — such as Vanguard's VTSAX or Fidelity's FZROX — already meet this threshold.

Step 5 — The account lifecycle

A Trump Account has a defined lifespan in its original form:

During childhood (birth to age 17)

The account is managed by the parent or guardian. No withdrawals are permitted for any reason during this phase — the no-early-access rule is absolute. Contributions can be made annually up to the limit. The balance grows tax-deferred inside the account.

At age 18 — automatic IRA conversion

On January 1 of the calendar year the child turns 18, the account automatically converts to a Traditional IRA. At this point:

• The young adult takes full and exclusive control of the account.
• The young adult becomes the only person authorized to make new contributions (up to standard IRA annual limits).
• The investment restrictions from the Trump Account phase lift — the account can now hold a wider range of IRA-eligible investments.
• Standard Traditional IRA rules govern withdrawals from this point forward.

Step 6 — Accessing the money

Once the account converts to a Traditional IRA at age 18, withdrawals follow IRA rules:

Standard IRA withdrawals (age 59½ and older)

Distributions after age 59½ are subject only to ordinary income tax. No early withdrawal penalty applies. This is the most straightforward use case — the account functions as a retirement fund.

Early withdrawals (ages 18–59½)

Distributions before age 59½ are subject to a 10% early withdrawal penalty in addition to ordinary income tax — unless a qualifying exception applies. The following exceptions allow penalty-free early withdrawal:

Tax treatment of withdrawals

A worked example

Consider a child born in March 2026 to a family that actively contributes to a Trump Account:

• 2026: Account is opened. The government deposits $1,000, invested in an S&P 500 index fund. The family contributes an additional $2,000 that year.
• 2026–2043 (ages 0–17): The family contributes an average of $3,000 per year. Total family contributions over 18 years: ~$54,000. Plus the initial $3,000 (government + first year family). With assumed average 8% annual market growth, the account could reach approximately $130,000–$160,000 by the time the child turns 18.
• January 2044: The account converts to a Traditional IRA. The 18-year-old has full control.
• Age 28: The young adult buys their first home and withdraws $10,000 penalty-free from the account toward the down payment.
• Age 65+: Remaining balance is drawn down as retirement income, taxed at ordinary income rates.

Summary of key rules

For the complete rules with tables and detail, see the Rules & Limits page. Quick reference:

• Child must have a U.S. SSN; U.S. citizenship required for the $1,000 government deposit.
• Annual limit: $5,000 family + $2,500 employer (separate).
• Investments: broad U.S. stock index funds, max 0.10% expense ratio.
• No withdrawals before age 18 — no exceptions.
• At 18: converts to Traditional IRA; standard IRA withdrawal rules apply.