There has been growing conversation about the newly created “Trump accounts” included in the One Big Beautiful Bill Act. With more news coverage surfacing, many clients have asked what these accounts are, how they work, and whether they should play a role in a long-term financial plan.
At TCI, our goal is to help simplify complex topics so you can make informed decisions with clarity and confidence. These new accounts are intended to encourage early saving for minors. At the same time, the structure and tax treatment may make them less effective than more familiar and flexible tools already available. This overview summarizes what we know today based on current guidance. As implementation details are finalized by the IRS, some aspects may change.
For clarity, the term “Trump account” is an informal nickname that has become widely used in public discussion. The official account type is established under the One Big Beautiful Bill Act.
How These New Accounts Work
Here are the key features based on the information currently available.
Availability
Expected to begin in July 2026 once the IRS finalizes the required forms and administrative process.
Contribution Limits
Up to $5,000 per year, including a maximum of $2,500 from an employer. Contributions are not tax deductible.
Federal Kickstart
A one-time $1,000 federal contribution for beneficiaries born between 2025 and 2028. Details about how these funds will be delivered or custodied are still pending.
Investment Requirements
All funds must be invested in low-cost, diversified stock index funds until the beneficiary turns 18. Specific investment options have not yet been announced.
Withdrawal Rules
Early withdrawals are not permitted except in the case of the beneficiary’s death.
Account Conversion at Age 18
At age 18, the account converts into a traditional IRA. Withdrawals are taxed as ordinary income and early withdrawals may be subject to a penalty unless an exception applies.
Tax Considerations
Only the beneficiary’s own after-tax contributions come out tax free. All employer, government, or charitable contributions, as well as investment earnings, are taxable when withdrawn.
Eligibility
To receive the federal contribution, the beneficiary must be a U.S. citizen with a work-eligible Social Security number.
These rules create a structure that is more restrictive and potentially less tax efficient than many existing planning options.
Should You Consider Opening One
If your employer offers a contribution or the beneficiary qualifies for the federal payment, opening an account to access those specific benefits may be worth considering. Many clients who are parents or supporting a younger family member have asked whether they should also contribute their own funds. The answer depends on personal goals, tax considerations, and the level of flexibility you prefer.
Because these accounts do not allow early access to funds, have limited investment choice, and convert into a traditional IRA with taxable withdrawals, some clients may find alternative planning tools more effective for supporting future needs. Discussing your specific circumstances with your advisor can help determine whether this account fits into your broader strategy.
Planning Alternatives That Offer Greater Flexibility
Several established planning tools already provide clear advantages for a wide range of clients. The best approach depends on what you are trying to support, whether that is education, early-adulthood milestones, long-term gifting, or broader legacy considerations.
529 Plans
529 plans remain one of the most versatile tools for education-focused saving. Many clients who are parents or grandparents use these accounts to support a child’s education. They offer tax free growth and tax free withdrawals for qualified education expenses. Many states also provide tax advantages for contributions. Recent rule changes allow certain unused funds to be transferred to a Roth IRA for the beneficiary within specific limits, which increases their long-term flexibility.
Roth IRAs for Minors
When a minor has earned income, a Roth IRA can be a powerful long-term strategy. Parents who want to help a child start saving early often consider this option when eligibility allows. Contributions grow tax free and future withdrawals in retirement are tax free. Even modest contributions early in life can accumulate meaningful value over time.
Custodial Brokerage Accounts (UTMA or UGMA)
Custodial accounts offer broad investment flexibility and can be used for any purpose that benefits the minor. Clients often use these accounts to help a young person with early career expenses or a down payment on housing. Earnings are taxed at the child’s tax rate up to certain limits. The main consideration is that full control transfers to the beneficiary at the age of majority.
Trusts
For clients with more complex needs, trusts can provide control, protection, and structure over long periods of time. They are often used for larger gifts, long-term legacy planning, or situations where beneficiaries may need guidance or financial support into adulthood. Trusts involve additional administrative requirements and costs but offer valuable customization.
Bottom Line: Align Decisions With Your Goals
While Trump accounts are receiving attention, they come with significant restrictions and tax considerations that may limit their usefulness for many clients. Existing planning tools often offer more flexibility, clearer tax advantages, and better alignment with long-term goals.
Your financial decisions should be guided by your objectives, values, and personal circumstances. If you are unsure how this new account type fits into your overall strategy, your TCI advisor can help you evaluate your options and design a plan that supports your vision for the future.
Important Disclosure
TCI Wealth Advisors, Inc. is an SEC registered investment advisor. This material is provided for informational purposes only and should not be construed as investment advice or a recommendation. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. TCI is neither a law firm, nor a certified public accounting firm and this material should not be construed as legal or accounting advice. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from TCI.
