$1K ‘Trump Accounts’ for Kids: How Do They Stack Up?
Trump Accounts set some kids up with a $1,000 nest egg. But other investment vehicles might offer better long-term benefits.
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President Donald Trump’s “one big, beautiful bill” is launching a new way to save for children’s futures: the “Trump Account.” This investment account gives kids who meet certain requirements $1,000 courtesy of the federal government.
But a Trump Account may not be a superior replacement for existing investment tools just yet.
What is a Trump Account?
Formerly called “Money Accounts for Growth and Advancement,” or “MAGA accounts,” the Trump Account is a special trust designed to give children a head start financially. Money contributed to these accounts gets invested in the stock market.
The Trump Accounts Contribution Pilot Program starts eligible kids off with a one-time $1,000 credit. The money comes from the Department of the Treasury.
Who qualifies?
Not every kid can get a Trump Account. To be eligible for the $1,000 credit under the pilot program, children must:
Be born between Jan. 1, 2025, and Dec. 31, 2028.
Be a U.S. citizen.
Have a Social Security number.
How do Trump Accounts work?
Getting started
Under the pilot program, the Treasury will set up accounts for qualifying kids if their parents haven’t already done so. Parents aren’t required to make an election.
How do contributions and withdrawals work?
Trump Accounts come with some restrictions. Contributions made before the calendar year in which the beneficiary turns 18 are limited to $5,000 per year. Employers can contribute up to $2,500 to accounts, which won’t count as income for the parents or children.
Trump Account distributions aren’t allowed before the first day of the calendar year the child turns 18.
Contributions made after the child’s 18th year generally follow traditional IRA rules. The IRA contribution limit in 2025 is $7,000 for those under age 50. The money invested grows tax-deferred, and withdrawals are taxed as ordinary income.
There’s a 10% penalty for withdrawing money from an IRA before age 59 ½, unless there’s a qualifying exception, such as homebuying, or paying for higher education expenses.
What about taxes?
Contributions made to Trump Accounts before the child’s 18th birth year must be made with after-tax dollars, which means no tax deduction for parents or employers, said Jacob Martin, a certified financial planner in Columbus, Ohio, in an email interview.
Contributions made during the 18th birth year and after could be deductible.
How do they compare with existing investment vehicles?
Trump Accounts have perks, but there are other long-term investment and college savings strategies that bring more to the table, financial experts say. Let’s explore a couple of options further.
Trump Accounts resemble traditional IRAs, except contributions made before the beneficiary’s 18th birth year aren’t deductible and have a lower annual cap. Unlike an IRA, there’s no earned income requirement to start.
Brokerage accounts, including UTMA & UGMA custodial accounts, don’t have contribution or withdrawal limits.
A 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 roll funds from one family member’s plan to another.
While the exact amount varies by state, contribution limits for 529 education savings plans are high. Contributions grow tax-free, and withdrawals are tax-free when made for qualifying expenses. Some plans offer state residents tax deductions. You can also roll over unused money, up to a certain amount, into a Roth IRA.
Is a Trump Account worth it?
If your child can get the $1,000 credit, consider it, Robert Persichitte, a CFP in Arvada, Colorado, said in an email interview.
“If it's free money, great. Take what you can get,” he said.
A Trump Account gives children the ability to start investing early with a little seed money. It could help establish a fund your kid could put toward buying a home or starting a business someday.
But for most taxpayers, Roth IRAs and 529 accounts are likely the better options because they offer much better tax savings, Persichitte said.
Other investment accounts, including IRAs, 529s and other custodial accounts, also allow higher contribution limits, which could help you save a larger amount over the long term.
