Trump Accounts Are Coming. Are They Right For You?

Trump Accounts, the new tax-advantaged accounts for children, are set to launch July 5. Yet for parents who want to get a head start on saving for their kid’s future, there are plenty of other ways to save in the meantime.

Determining what type of account is best for your child will depend on your goals and preferences. Do you want to invest in their college education or open an account that offers more flexibility, allowing them to use their cash for whatever they want after they turn 18?

Here’s a guide to figuring out where to stash your money before the Trump Accounts open later this year.

How Do Trump Accounts Work?

In order to open a Trump Account for your child, you’ll have to make an election for it on the new tax form 4547 when you file your taxes.

Not everyone will be eligible for the $1,000 one-time federal contribution—only babies born between 2025 and 2028 can qualify. These accounts have an annual contribution limit of $5,000, which is indexed to inflation, and contributions grow tax-deferred until withdrawal.

With these accounts, parents, relatives, nonprofits, employers and more can contribute. A child cannot access the funds in these accounts until they’re age 18, after which these accounts are treated like an IRA, where withdrawals are taxed at ordinary income tax rates.

According to the official Trump Accounts website, these accounts will launch on July 5, but no details have been released about which financial institutions will administer them.

Are There Similar Products to Trump Accounts Already Available?

Trump Accounts offer people the option to invest for their child’s future, whether for retirement, college, or a down payment on a home. However, other accounts may offer more attractive tax benefits.

For example, with a 529 savings plan, your investments grow tax-deferred and withdrawals are typically exempt from state and federal taxes when used for qualified education expenses. Plus, some states allow people to deduct their contributions from their state taxable income.

Or if your child is older, has earned income—like a part-time job as a cashier—and you want to help them save for retirement, you might consider opening a custodial IRA for them. With a custodial IRA, the account generally belongs to the child once they turn 18.

Plus, when you opt for a Roth IRA, your child will pay taxes on their upfront contributions, but they’ll be able to withdraw their earnings tax-free at age 59½. Compare that to a Trump Account where you don’t receive a tax break on your contributions, and you pay taxes on your withdrawals.

However, if you want the greatest amount of flexibility with your funds and are okay with forgoing the tax benefits offered by other accounts, a custodial brokerage account can be a solid option. These accounts don’t have contribution limits and the child can use the money as you see fit when they get control of the account.