How Parents and Grandparents Should Use Trump Accounts

We've been getting a lot of questions from clients about Trump Accounts lately — and honestly, there's a fair amount of confusion about them. That makes sense. They're brand new. So let's break down what they actually are, how they work, and look at a couple of examples.

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What is a Trump Account?

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Here's the thing we want you to remember: a Trump Account is really just a retirement account for a child under 18. That's it.

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The accounts were created in the spirit of traditional retirement accounts, but they're built for kids. Anyone who has a child under 18 can open one — they are not limited to children born between 2025 and 2028.

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There is, however, a special provision tied to those birth years: the federal government will deposit $1,000 into a Trump Account for children born from 2025 through 2028. But the accounts themselves are for any child under 18.

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The three types of contributions

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There are three ways money can go into a Trump Account:

• Direct contributions — made by individuals like parents, friends, and grandparents. These are made in cash, with after-tax dollars.
• Employer contributions — made by an employer, either to an employee's child's account or to the account of an employee who is the custodian of their child's Trump Account.
• Qualified general contributions — made by federal, state, and local governments. Certain charitable organizations can also contribute.

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How much can go in

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The combined total that can be deposited into a Trump Account in any one year is $5,000.

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Employer contributions are capped at $2,500 — but that cap is per employee. So if both parents work, each parent's employer can contribute $2,500, for a combined $5,000.

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The $1,000 government deposit for the pilot program does not count toward the $5,000 annual limit. So a child born between 2025 and 2028 could receive $6,000 in that first year.

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What happens at age 18

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When the child turns 18, the account is generally treated like a traditional IRA, and traditional IRA rules apply from that point forward.

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The biggest rule to remember: once the account is treated as a traditional IRA, the account holder needs earned income — per IRS guidelines — to keep making contributions.

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One important warning

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Before contributing to a Trump Account, parents really need to consider their own retirement needs and their children's education needs first.

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A Trump Account is meant for the child's retirement — not for college, not for near-term goals. It's a fantastic tool, but it works best once the more immediate priorities are already covered.

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This is also where Trump Accounts become an excellent opportunity for grandparents who want to give a grandchild a head start on retirement.

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The logistics

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You can open these accounts at trumpaccounts.gov, and contributions can be made starting after July 4th of this year.

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There are two custodians to start, which is a little unusual: Robinhood and Bank of New York Mellon. The investment options will be low-cost index funds and ETFs.

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Two examples

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This is where it gets interesting.

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Example 1 — Let compounding do the work.

‍Assume the government contributes $1,000 in the year of birth, and then $5,000 is saved every year from age 0 to age 17, growing at 6% per year. At age 60, that account would have roughly $2.2 million in it. That's just the eighth wonder of the world — compounding — doing what it does, growing and growing and growing.

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Example 2 — Add a Roth conversion.

‍Same setup: $1,000 from the government at birth, then $5,000 a year from age 0 to 17. But in this case, the account grows at 7% per year, and there's a plan to convert it to a Roth IRA at age 24. At age 24, the family pays the tax on the conversion — roughly $43,550. And here's the part that matters: once the money is in a Roth, it's never taxed again. No income tax, no capital gains tax — it grows tax-free, forever. In this scenario, by age 59½ that Roth IRA would be worth roughly $3.07 million.

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So it's very cool how you can take advantage of the compounding in those early years and set a child up with a tax-free nest egg down the road.

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About Dolan Capital Advisors

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Dolan Capital Advisors is a financial planning and investment management firm with the mission of simplifying finances and reducing stress for physicians. We currently manage about $190 million in assets, we have a fiduciary relationship with our clients at all times, and we are a fee-only firm — meaning our only source of income comes from our clients.

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If you'd like to talk through how Trump Accounts might fit into your family's plan, schedule a complimentary consultation.