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Tax season is here, and President Donald Trump is asking American families to claim a “Trump Account.”
The Trump administration hosted the Trump Account Summit in the frigid nation’s capital on January 28 to tout a federal program that would give every child born between 2025 and 2028 $1,000 in a savings account.
“Perhaps no provision in the Great Big, Beautiful Act has a more significant impact than President Trump’s account,” Trump said at the event, referring to a bill passed last year that created a new savings plan.
Big companies have taken advantage of the Trump account trend. On January 28, major banks JPMorgan Chase and Bank of America separately announced that they would match the government’s investment and contribute $1,000 each to eligible employees’ retirement savings accounts. Other companies, including tech company Broadcom, have made similar pledges.
“By doing this, we are not only matching donations, we are investing in the future engineers, entrepreneurs, and leaders who will continue to make America the most innovative nation on earth,” Broadcom CEO Hock E. Tan said in a video, in which the company pledged to match the U.S. government’s $1,000 donation for all U.S.-based employees.
Essentially, think of a “Trump Account” as a seed fund to encourage children and families to save and build wealth for various expenses as they grow up.
“This is an IRA for kids,” Evan Morgan, a principal in the tax advisory group at accounting and advisory firm Kaufman Rossin, told USA TODAY in 2025.
The Trump account is part of the tax and spending package that President Donald Trump signed into law last summer. They join a crowded field of tax-advantaged savings plans that help Americans weather education, health care and retirement costs, among other things.
What is unusual in this case is that the account starts with a balance of $1,000 from birth.
“For me, the best-case scenario for that thousand dollars is that it’s going to stay in my IRA with compound interest until I retire,” J. Spencer Williams, founder and CEO of financial technology company Retirement Clearinghouse, told USA TODAY in 2025.
How does a “Trump Account” work?
Here’s how the account works, according to analysis from Morningstar, the Tax Foundation, and other sources.
The government has committed to creating an account for babies born between 2025 and 2028 and funding it with a one-off deposit of $1,000. To qualify, your baby just needs to have a Social Security number.
Parents and others can contribute up to $5,000 a year to the account until the child turns 18. Employers can contribute up to $2,500 against a $5,000 limit. State and local governments and private charities are eligible for a wide range of donations.
No one can contribute to this account until July 2026. Other details are still being worked out.
To claim the account, parents will likely need to check a box on their tax form to prove they’re a new parent, said Williams of the Retirement Clearinghouse.
The new law requires funds in Trump accounts to be invested in low-cost stock index funds that reflect the performance of indexes such as the S&P 500.
After age 18, Trump account functions like an IRA
Parents’ contributions are after-tax, but not taxed when the money is withdrawn. However, the proceeds from your donation will be taxed upon withdrawal.
Generally, you cannot withdraw money from a Trump account until the year your child turns 18. After that, it functions like a traditional individual retirement account.
That means 20 or 30 years from now, young people with Trump accounts will be able to withdraw money without penalty to pay for their education or buy their first home.
You can also keep your money until you retire. Once you reach age 59 1/2, there is no penalty for early withdrawal.
This account was originally designed for use by adult children. The Senate restructured them to be more like traditional IRAs.
“At the end of the day, this just became a retirement account, and there’s nothing wrong with that,” Miklós Ringbauer, a certified public accountant in Southern California, said in a 2025 interview.
The last-minute change left many people confused about the Trump account. Ringbauer said he answered questions from customers.
“We have to correct all the misinformation that is out there,” he said.
Is a Trump account a good investment?
Ringbauer said it was hard to imagine many parents would pass up the chance to get an account, given the promise of free funding from the government.
“Anything is better than nothing,” he said. “There are a lot of kids starting out with nothing.”
Perhaps the more difficult question is whether parents should actively contribute to the account over the next 18 years.
“It’s free money. The question is, are you going to add to it?” Monique Morrissey, a senior economist at the left-leaning Economic Policy Institute, said in a 2025 interview.
If your goal is to save for your child’s education, a 529 education savings account offers “flexibility and tax benefits,” according to an analysis by the Tax Foundation.
“I think most parents would be better off saving in a 529 for their kids instead of this new Trump account, but it certainly makes sense to raise a $1,000 contribution,” Romina Boccia, director of budget and rights policy at the Cato Institute, a libertarian think tank, told USA TODAY in 2025.
Boccia called the Trump account “a blatant giveaway and a way for the Trump administration to leave a permanent mark on a useless savings account by putting the current president’s name on it.”
Morrissey predicts Trump accounts will become a “niche thing” favored by parents with large portfolios and paid investment advisers. “I don’t think these will become very popular,” she says.
The U.S. Tax Foundation points out that the U.S. tax code already provides for “at least 11 types of tax-advantaged savings vehicles, each with different rules, limits, and regulations.”
Trump account encourages long-term savings
Trump accounts, on the other hand, encourage long-term retirement savings, the kind commonly recommended by financial planners. The sooner you invest, the more likely your investment will grow by the time you turn it into cash.
“You could say that’s an 18-year early start to retirement,” Neil Ringquist, executive vice president of the Retirement Clearinghouse, said in a 2025 interview.
Indeed, Trump accounts add further complexity to the tax code. However, there is nothing to prevent the account owner from merging the Trump account with other retirement accounts after reaching the age of majority.
“If the money isn’t spent, it becomes a regular traditional IRA as an adult,” Williams said.
The initiative is expected to cost an estimated $15 billion by 2034, at a time when the U.S. government faces a $37 trillion national debt.
Still, supporters hope the new accounts will help children gain financial literacy as they build wealth as adults.
“This is a really big step forward in terms of taking advantage of America’s free markets and the opportunities of growth and compound interest to help people save for what’s next,” Williams said.
Reuters contributed to this report.
