Trump Accounts: Free Money for Your Kids (And How to Maximize It)

I've got four kids. So when the government announced it was giving $1,000 per newborn through these new "Trump Accounts," I immediately started running the numbers.

This is a big deal. For the first time ever, kids can start compounding in a tax-advantaged retirement account from birth—no earned income required. If you're thinking about building generational wealth, this is worth paying attention to.

Are you ready? Standby.

What Are Trump Accounts?

Trump Accounts are tax-deferred investment accounts for kids under 18, created under the One Big Beautiful Bill Act that was signed into law on July 4, 2025. Think of them as a hybrid between a 529 plan (a tax-advantaged education savings account) and a traditional IRA (a retirement account where you pay taxes on withdrawals)—with some unique advantages.

Here's the quick rundown:

• $1,000 government seed money for U.S. citizen children born between January 1, 2025, and December 31, 2028
• $5,000 annual contribution limit per child (aggregate across all contributors—parents, grandparents, friends combined). Indexed to inflation starting 2028.
• $2,500 employer contribution that doesn't count as taxable income to you, but this counts toward the $5,000 cap (not on top of it)
• Tax-deferred growth until withdrawals
• Investments limited to low-cost index funds tracking the S&P 500 or similar U.S. stock indexes
• No withdrawals until the child turns 18, at which point the account converts to a traditional IRA

To open an account, file IRS Form 4547 with your 2025 tax return—contributions can begin July 4, 2026.

Why This Actually Matters

Here's what most people miss: your kid can now start tax-advantaged compound growth from birth—instead of waiting for their first job.

Normally, you can't contribute to an IRA without earned income. A 5-year-old can't have a Roth IRA (a retirement account where your money grows and can be withdrawn tax-free). But Trump Accounts change that. You're essentially giving your kid an 18-year head start on retirement savings before they ever earn a dollar.

Think about it: most people don't open their first IRA until their early 20s. A kid with a Trump Account has been compounding since age 0. That 20+ year head start isn't just "nice to have"—it's potentially hundreds of thousands of dollars in difference by retirement.

That's the real story here. The $1,000 government seed money is nice. But the ability to start the compounding clock at birth? That's generational.

Who's Eligible for Free Money?

There are a few ways to get free seed money, so let me break it down:

$1,000 from the Treasury: Any U.S. citizen child born between January 1, 2025, and December 31, 2028. No income requirements. File Form 4547 to claim it.

$250 from the Dell Foundation: Children age 10 and under, born before January 1, 2025, who live in a ZIP code where median income is under $150,000. This covers roughly 75% of U.S. ZIP codes. No separate form required—just open the account. (Michael and Susan Dell donated $6.25 billion for this—one of the largest charitable gifts to American children ever.)

Any child under 18 can have a Trump Account opened for them and benefit from tax-advantaged growth—even if they don't qualify for the free seed money.

Let's Talk Numbers: The Power of Compound Interest

Here's what different contribution strategies look like over time, assuming 7% annual returns:

Assumes 7% annual returns. At 10% returns (closer to S&P 500 historical average), balances would be significantly higher.

A few things jump out:

The 18-year head start is massive. Compare "Max Trump Account, then stop" to "Late starter." The Trump Account kid contributes $90K total ($5K × 18 years), then never invests another dollar. The late starter contributes $329K ($7K × 47 years). Yet the Trump Account kid still ends up with $100K more by age 65. That's the power of starting at birth.

Your kid could be a millionaire before 40. Max out contributions until 18, then keep contributing the IRA max ($7,000/year). By 45, they'd have $1.4 million. By 65, $5.7 million.

Even $50/month gets you somewhere. That's $600/year, well under the $5,000 limit. By retirement, your kid could have nearly $600K.

Even the free $1,000 alone grows. It roughly triples over 18 years without additional contributions. By 65, that single $1,000 becomes $54,000—not bad for doing nothing.

What to Know Before You Start

Every financial tool has its nuances. Here's what to keep in mind:

1. Withdrawals are taxed as ordinary income. Unlike a 529, where qualified education withdrawals are completely tax-free, Trump Account withdrawals get taxed. But there's a way around this—and if you play it right, it could mean hundreds of thousands (even millions) more by retirement. Keep reading.

2. Can't touch it until 18. The account is locked until the child becomes an adult—which honestly might be a feature, not a bug. It forces long-term thinking.

3. The $5,000 cap is shared. All contributors—parents, grandparents, friends—share the same $5,000 annual limit per child. Coordinate with family so you don't accidentally go over.

4. No frontloading allowed. Unlike 529 plans where you can "superfund" up to $95,000 at once, Trump Accounts have a hard cap of $5,000 per year. Consistency beats lump sums here.

The Real Play: Roth Conversion Ladder Starting at 18

Here's where it gets interesting.

When your kid turns 18, the Trump Account converts to a traditional IRA—meaning withdrawals get taxed as income. But here's the trick: if your kid has little to no income, they can convert chunks of that traditional IRA into a Roth IRA and pay almost nothing in taxes. College students, gap year travelers, and anyone just starting out can take advantage of this.

I wrote a detailed breakdown of how the Roth conversion ladder works if you want the full strategy.

For 2026, the standard deduction is around $15,000 and adjusts annually for inflation. That means your kid can convert up to ~$15,000 per year from their Trump Account to a Roth IRA and owe $0 in federal taxes.

Let's say you maxed out contributions and your kid has ~$175,000 at age 18. Here's how the conversion ladder could work:

Assumes 7% annual returns on both accounts. The Roth balance grows tax-free forever.

After 5 years, your kid has moved $75,000 into a Roth IRA tax-free—and that money now grows tax-free forever. Keep going and they could convert the entire balance before they hit peak earning years.

The key is that your kid needs to have low income during these years. If they land a $90K job right out of college, they can still convert—just at a higher tax bracket. But for kids who are:

• In college full-time
• Taking a gap year
• Starting a business with little income
• In grad school
• Working part-time while figuring life out

...this is a massive opportunity to shift money from "taxed later" to "never taxed again."

My Plan

Here's my strategy:

1. Trump Accounts for flexibility — max out for several years, grab the free seed money, and execute the Roth conversion ladder as soon as they turn 18
2. Let them figure out college — scholarships, community college, trade schools, in-state tuition—there are plenty of paths that don't require a blank check from mom and dad
3. Set them up for life — by the time they graduate college, they should have north of $100k in their IRA, which should easily compound to millions by the time they retire

The beauty of reaching FIRE is having options. And now my kids will have a few more options when they hit adulthood—but they'll also understand that options come from being resourceful, not from handouts.

Resources:

• IRS Trump Accounts Page
• Form 4547 Instructions
• TrumpAccounts.gov (portal live mid-2026)
• Fidelity's Trump Account Explainer
• Schwab's Trump Account Overview