Is the New "Trump Account" a Must-Have for Your Child?

Have you been hearing the buzz about "Trump Accounts" and wondering if you’re missing out on free money for your kids? With the official launch set for July 5, 2026, many parents are asking: is this a financial "no-brainer" or just another account to manage?

The short answer? It depends on when your child was born and what your ultimate goals are. Let’s break down “the Good, the Bad, and the Indifferent" so you can prioritize your savings properly.

The Good: $1,000 "Free" Money

If your child was born between January 1, 2025, and December 31, 2028, the federal government can potentially contribute a one-time $1,000 seed deposit just for opening the account.

Think of this as a "Welcome to the World" gift from the taxpayers (probably you). If your child fits this window, opening the account is a clear win. Even if you never add another cent, that $1,000 can grow tax-deferred for decades.

The Bad: The Control Problem

Here is the catch: at age 18, the account automatically becomes the child’s property. It is treated like a Traditional IRA in their name.

While there are penalties for non-qualified withdrawals before age 59½, an 18-year-old legally gains control. If you prefer to maintain "parental veto power" over how the money is spent, a standard brokerage account in your name might still be the better "mental earmark" strategy.

The Indifferent: Limited Investment Choices

I have heard financial professionals decry the lack of non-US investment options in these accounts. I honestly don’t really care that much. This account should be one of a handful of accounts your child will benefit from over time, and so the international diversification can be picked up elsewhere.

A U.S.-based child who will likely spend his or her investment dollars on a U.S. education, a U.S. home, and/or to open a U.S.-based business should not be too adversely affected by investing only in U.S. companies in this one account.

Who Can Contribute?

Anyone can help build this nest egg. Parents, grandparents, and even your employer can contribute. However, there are some strict guardrails to keep in mind:

The total annual limit is $5,000 per child.
Your employer can contribute up to $2,500 of that total tax-free.
Contributions are made with after-tax dollars, meaning you don't get a federal deduction today.

What Can the Money Be Used For?

To avoid a 10% early withdrawal penalty, the funds can potentially be used for "qualified" life events. The current list includes:

First-time home purchases
Higher education expenses
Starting a business
Birth or adoption expenses

Keep in mind: while you avoid the penalty for these uses, the earnings are still generally taxed as ordinary income. This is a major difference from a 529 plan.

Trump Accounts vs. 529 Plans

If your primary goal is college, the 529 plan still wears the crown.

Tax Savings: 529 withdrawals for education are tax-free; Trump Account withdrawals are tax-deferred (you'll owe income tax on the growth).
State Tax Breaks: Many states offer a tax deduction for 529 contributions. It is currently unclear if states will offer similar breaks for Trump Accounts.
Control: You keep control of a 529 indefinitely. With a Trump Account, you hand over the keys at 18.
Contributions: Trump accounts are limited to $5,000 in annual contributions. 529 contribution limits vary by state, but most people prefer to limit their contributions based on the annual gift tax exclusion, currently $19,000 in 2026.

Since 529 plans benefit from “bunching” rules and the gift tax exclusion is on a per person basis, a married couple could contribute (gift) up to $190,000 to a 529 plan in one year without having to file a gift (2 people at $19,000 each bunching 5 years together).
Qualified Distributions - Trump Accounts appear to be more permissive in terms of what constitutes a qualified distribution, which avoids penalties on the amounts withdrawn. 529 plans are more limited in scope to focusing on education expenses.

My "Cheat Sheet" for Prioritizing

Don't let the "newness" of this account distract you from your main plan. Here is how I suggest you prioritize your extra dollars:

Your own retirement (401k/IRA)
Your own brokerage account (Total control)
A Roth IRA for your child (If they have legitimate earned income from legitimate work)
A 529 Plan (For tax-free college growth)
The Trump Account (Possibly free $1,000 and tax-deferred growth)
A Custodial Account (UGMA/UTMA; no tax advantage but penalty-free use)

Ready to get started? Opening these accounts can be done via the new IRS Form 4547 or online. Want some help? Reach out to us!

Get in Touch: Contact@ConcertPlanning.com

Schedule a Call