Video script:
I’m Rob Greenman.
The One Big Beautiful Bill Act introduced a new type of savings vehicle informally known as Trump accounts. These accounts are designed only for children under the age of 18.
Once the child reaches 18, the Trump account automatically becomes a traditional IRA, and from that point forward, it follows all normal IRA rules. Contributions can’t begin until July 4th, 2026, which gives the IRS time to issue guidance. Still, here’s what we know today. Families can contribute up to $5,000 per year, and employers may add up to $2,500 for working teens.
For children born between 2025 and 2028, the federal government will even make a one-time $1,000 contribution. How do they fit into planning? Well, think of them alongside 529 plans, Roth IRAs, and health savings accounts. They don’t replace those tools, but they add another layer of flexibility for multi-generational planning and family support. Here’s how the tax treatment works.
Contributions from parents or grandparents, they aren’t tax-deductible, but they come out tax-free later. Government and employer contributions, along with earnings, are taxable when withdrawn. That means each distribution may be part tax-free and part taxable, depending on the source of the funds. Take a practical example. A teenager with a part-time job might see contributions from their employer, additional savings from parents or grandparents, and if they were born in the right window, a $1,000 government deposit on top. It’s a structured way to jumpstart savings for the next generation.
Of course, some rules, they remain unclear. How will accounts be opened? How will families elect the $1,000 contribution? And will Roth conversions be allowed once a child turns 18? We expect clarity on all these questions before contributions begin.
For now, the key takeaway is this. Trump accounts expand the menu of planning tools available to families. The real question is how and whether they fit into your broader wealth strategy. At Vista, our role is to help you evaluate the trade-offs so your family’s savings are set up to support long-term goals.
