(Nerdwallet) – President Donald Trump’s “One Big Beautiful Bill” launches the “Trump Account,” a new way to save the future of children. This investment account is courtesy of $1,000, courtesy of the federal government to children who meet certain requirements.
But the Trump account may not yet be a great alternative to existing investment tools.
What is a Trump account?
Previously called the “Money Account for Growth and Progress” or “MAGA Account”, the Trump Account is a special trust designed to give your child a financial head start. Money contributed to these accounts will be invested in the stock market.
The Trump Account Contribution Pilot Program starts eligible children with a single $1,000 credit. The money comes from the Ministry of Finance.
Who is eligible?
Not all children can get a Trump account. To qualify for a $1,000 credit under the pilot program, a child must:
Born between January 1, 2025 and December 31, 2028. Become a US citizen. I have a Social Security number.
How does Trump account work?
Get started
Under the pilot program, the Treasury will set up accounts for eligible children if their parents are not already doing so. Parents don’t need to vote.
How do contributions and withdrawals work?
There are several restrictions on Trump’s account. Donations made before the calendar year that beneficiaries turn 18 are limited to $5,000 per year. Employers can donate up to $2,500 to their account, but this does not count as parents or children’s income.
Distribution of Trump accounts is not permitted by the first day of the calendar year. The child will be 18 years old.
The contributions made after the 18th year of a child generally follow traditional IRA rules. The 2025 IRA contribution limit is $7,000 for people under the age of 50.
There is a 10% penalty to withdraw money from your IRA before age 59½, unless there are qualified exceptions, such as home buying or paying for higher education.
How about taxes?
In an email interview, Jacob Martin, a certified financial planner in Columbus, Ohio, said that any contribution to an account made prior to the child’s 18-year-old birth must be made in post-tax dollars.
The year of birth of 18 years and subsequent contributions are deductible.
How do they compare to existing investment vehicles?
Trump’s account has perks, but there are other long-term investments and university savings strategies, which brings more to the table, says finance experts. Let’s look at some more options further.
Trump’s accounts resemble traditional IRAs, except for contributions made before the beneficiary’s 18-year-old birth year cannot be deducted and the annual cap was low. Unlike an IRA, there is no earning income requirement to start.
Securities accounts that include UTMA and UGMA managed accounts do not have any contribution or withdrawal restrictions.
The 529 plan offers more flexibility than a Trump account when it comes to who can open an account and use the money. For example, account holders can change beneficiaries or throw funds from family plans to another family plan.
The exact amount varies from state to state, but contribution limits for the 529 Educational Savings Plan are high. Contributions increase tax-free, and withdrawals are tax-free if made for qualifying expenses. Some plans offer tax credits to state residents. You can also roll over unused money to a certain amount into a Loss IRA.
Is Trump’s account worth it?
If your child can earn $1,000 in credit, consider that, Robert Persichit, CFP in Alvada, Colorado, said in an email interview.
“If it’s free money, it’s great. Take what you can get,” he said.
Trump accounts give children the ability to start investing early with a little bit of seed money. It will help your child establish funds that could potentially end up buying a house or starting a business one day.
But for most taxpayers, the Roth IRA and 529 accounts are likely to be a better option as they offer much better tax savings, Persichitte said.
Other investment accounts, including IRAs, 529 and other custody accounts, also allow higher contribution limits.
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