The IRS recently issued additional guidance (IR-2025-117 and Notice 2025-68, released December 2, 2025) on a new type of retirement savings vehicle known as a Trump Account, set to become available in 2026. While many administrative questions remain, families can now begin to understand how these accounts may fit into long-term financial planning for children.

A Trump Account is a newly created, tax-advantaged individual retirement account (IRA) established under the One Big Beautiful Bill Act (OBBBA) and codified in Section 530A of the Internal Revenue Code. It is designed specifically for children under age 18, with the goal of helping families start retirement-focused investing early—even before the child has earned income.

Unlike traditional or Roth IRAs, no earned income is required. Parents and other eligible contributors may fund the account on the child’s behalf.

The IRS has confirmed that contributions will not be permitted until July 4, 2026.

A Trump Account may be opened for any child who:

• Has a Social Security number, and
• Has not reached age 18 by the end of the year the election is made.

The election to open the account is expected to be made by a parent, legal guardian, adult sibling, or grandparent using Form 4547 (currently in draft form).

Although full custodial rules have not yet been finalized, Trump Accounts are expected to operate similarly to custodial IRAs, with an adult serving as custodian until the child is legally allowed to assume control.

Under current guidance:

• Total contributions are capped at $5,000 per year, aggregated across all contributors.
• This limit applies whether contributions come from parents, relatives, employers, or others.
• The limit will be indexed for inflation beginning in 2028.

Exceptions to the $5,000 cap include:

• The one-time $1,000 federal pilot contribution (details below)
• Qualified contributions from governments or charities for defined beneficiary groups

Employers may contribute up to $2,500 per year to an employee’s dependent’s Trump Account. These contributions:

• Are not included in the employee’s taxable income
• Do count toward the child’s $5,000 annual limit

Employers may also allow employees to contribute via a Section 125 cafeteria plan, enabling pre-tax salary reductions into the account.

Certain governmental and charitable organizations may also make contributions for eligible populations, such as children in foster care.

Trump Accounts are restricted to broad-based U.S. equity index funds, such as those tracking the S&P 500.
Investments cannot include:

• Individual stocks
• Cryptocurrency
• Alternative investments

Withdrawals are prohibited until January 1 of the year in which the child turns 18, except for limited circumstances that remain undefined.

Afterward, the account is treated much like a traditional IRA, with:

• Withdrawals taxed as ordinary income
• Early withdrawal penalties applying before age 59½ (unless an exception applies)
• IRA basis rules determining how contributions and earnings are taxed

The highly discussed $1,000 federal seed contribution applies only to certain children.

To qualify, a child must be:

• A U.S. citizen
• Born between January 1, 2025, and December 31, 2028
• Properly enrolled using a timely Trump Account election

This contribution does not count toward the $5,000 annual limit. Children born outside the 2025–2028 window do not qualify unless Congress acts to extend the program.

The key distinction: Trump Accounts are specifically designed for long-term retirement savings—not education funding or short-term needs.

Several important elements remain unresolved pending additional IRS guidance, including:

• Whether funds can be rolled into Trump Accounts from 529 plans or other custodial arrangements
• How states will treat Trump Accounts for tax purposes
• Detailed rules for custodians and trustees

The IRS has requested public comments, and further clarification is expected throughout 2026.

Even though contributions cannot start until July 2026, families can begin preparing by:

• Reviewing eligibility for children born between 2025 and 2028
• Understanding how contribution caps and custodial rules may apply
• Meeting with a tax or financial advisor to see how a Trump Account fits into existing savings strategies

Parents already utilizing 529 plans or custodial Roth IRAs should be especially cautious about assuming a one-for-one replacement. Based on current guidance, Trump Accounts serve a separate and more restrictive purpose.

The IRS’s December 2025 guidance provides meaningful clarity, but these accounts are still evolving. More information is expected in the months ahead.

For now, families should know this: Trump Accounts are coming, they may offer meaningful long-term benefits, and the landscape will continue to develop as the IRS releases additional guidance.