By The Galecki Financial Management Team
If you’ve been hearing about a new federal investment account for children and wondering whether it’s worth opening one for your kids or grandkids, you’re not alone. The Trump Account, created by the One Big Beautiful Bill Act in 2025, has gotten a lot of attention—and a lot of questions.
Here’s the timely piece: accounts can’t actually be opened and funded until July 4, 2026. That gives families a short window this summer to understand the rules before deciding whether a Trump Account fits into their financial plan.
At Galecki Financial Management, a Fee-Only wealth management firm serving families in Fort Wayne and throughout Northeast Indiana, we’re Fee-Only for a reason: we want our advice on a new account type to be honest and unbiased, not driven by a commission. So here’s a clear-eyed look at how Trump Accounts work, who benefits most, and how they compare to the savings tools families have used for years.
What Is a Trump Account?
A Trump Account is a new type of tax-advantaged investment account for children under 18 with a Social Security number. Think of it as a hybrid: it’s structured like an individual retirement account, but it’s opened for a child and funded by parents, grandparents, employers, and others while the child is still a minor.
The key features:
- Money grows tax-deferred during the years the child is under 18 (called the “growth phase”).
- Contributions from parents and family are made with after-tax dollars and are not deductible.
- Withdrawals are generally not allowed while the child is a minor.
- When the child turns 18, the account converts to a traditional IRA and follows standard IRA distribution rules.
Only a parent or legal guardian can actually open the account, but once it’s open, contributions can come from a wide range of sources.
The $1,000 Federal Deposit: Who Qualifies
This is the part that’s gotten the most headlines. Under a pilot program, the federal government will deposit $1,000 into a Trump Account for every child who meets all three of these criteria:
- Born between January 1, 2025, and December 31, 2028
- A U.S. citizen
- Has a valid Social Security number
To claim it, the parent or guardian files IRS Form 4547 with their tax return. An online portal at trumpaccounts.gov is also expected to launch in summer 2026 for families who prefer to apply that way.
Children born before 2025 can still have a Trump Account; they just don’t receive the federal seed money. There’s also a separate $250 deposit from the Michael and Susan Dell Foundation available to certain children under age 10 living in ZIP codes with median household incomes of $150,000 or less. That program has its own application process.
Who Can Contribute, and How Much
Once the account is open, the contribution rules are straightforward:
- $5,000 per year, combined, from all individual sources. This includes parents, grandparents, aunts, uncles, family friends—anyone who wants to contribute. The limit is indexed for inflation starting after 2027.
- $2,500 of that limit can come from the child’s parent’s employer. If an employer sets up a formal Trump Account benefit, they can contribute up to $2,500 per year tax-free to the employee’s child’s account. That counts toward the $5,000 annual cap.
- Government and charitable contributions don’t count against the $5,000 limit. The $1,000 federal seed deposit, the $250 Dell grant, and other qualified general contributions from states, the federal government, or 501(c)(3) organizations are above and beyond the annual cap.
One important note for families who already save aggressively for their children: contributions to a Trump Account do not reduce how much your child can contribute to a Roth IRA or a 401(k) once they have earned income. The limits are separate.
What the Money Can Be Invested In
This is where Trump Accounts differ sharply from a brokerage or 529 plan. During the growth phase (until the year the child turns 18), the money has to be invested in a low-cost mutual fund or exchange-traded fund that tracks a U.S. stock index, like the S&P 500. The fund must have annual expenses below 0.1 percent of the balance.
Translation: no individual stocks, no bonds, no international funds, no actively managed strategies. Just a broad U.S. stock index fund with rock-bottom fees. That’s a deliberate design choice meant to keep the account simple and low-cost, but it also means there’s no way to dial down risk as the child gets older. The account will be 100 percent U.S. stocks the entire time it’s in the growth phase.
For families who already have a comprehensive financial plan in place, this rigid investment menu is worth thinking about. It’s a fine starter account, but it isn’t a substitute for a thoughtful overall strategy.
What Happens When Your Child Turns 18
The year your child turns 18, the Trump Account converts to a traditional IRA, and your child becomes the sole owner. Here’s what that means in practice:
- Your child controls the money. Not you. Not the account custodian. Your child can change the investments, take distributions (subject to penalties), or leave it alone to keep growing. This is a significant difference from a 529 plan or a custodial account where parental control extends longer.
- Standard IRA distribution rules kick in. Withdrawals before age 59½ are generally subject to a 10 percent early-withdrawal penalty on top of ordinary income taxes, with the usual exceptions for things like a first-time home purchase, qualified higher education expenses, or disability.
- All earnings are taxed as ordinary income on withdrawal. This is a notable difference from a regular brokerage account, where long-term capital gains and qualified dividends get preferential tax rates. A Trump Account loses that advantage.
If your child has special needs, the account can also be rolled into an ABLE account starting at age 17, which is a good option to know about.
How Trump Accounts Compare to 529 Plans and Roth IRAs
This is the question we expect to hear most often from clients in Northeast Indiana: “If I can only save a certain amount each year for my child or grandchild, where should it go?” Here’s the honest answer: it depends on the goal.
If the Goal Is College
A 529 plan is still the strongest tool. Contributions grow tax-free and come out tax-free for qualified education expenses. Indiana also offers a state income tax credit of up to $1,500 per year for contributions to a CollegeChoice 529 plan, which is a significant benefit Trump Accounts don’t provide. The new tax law also expanded what 529s can pay for, including K-12 expenses up to $20,000 per year.
If the Goal Is Long-Term Wealth-Building and Your Child Has Earned Income
A Roth IRA is hard to beat. Contributions grow tax-free, withdrawals in retirement are tax-free, and your child has flexibility along the way. The catch is that your child needs earned income (i.e., wages from a real job) to contribute. A Trump Account doesn’t require earned income, which is its biggest structural advantage for very young children.
If the Goal Is Long-Term Wealth-Building and Your Child Does Not Have Earned Income
This is where a UTMA (Uniform Transfers to Minors Act) account fills the gap. UTMAs are custodial brokerage accounts opened by a parent or grandparent for the benefit of a minor. They have no earned-income requirement and no annual contribution limit (though gifts above the annual gift tax exclusion still need to be reported), and—most importantly—no restrictions on what the money can eventually be used for.
That flexibility is what makes UTMAs powerful when the goal is a flexible nest egg: a down payment on a first home, seed capital to start a business, a wedding, or simply resources that help a young adult get a stable start. UTMAs also let you invest in whatever you want (e.g., individual stocks, bonds, mutual funds, ETFs), not just a single S&P 500 index fund. And qualified dividends and long-term capital gains are taxed at preferential rates inside a UTMA, whereas Trump Account earnings will be taxed at ordinary income rates when withdrawn.
The tradeoffs: in Indiana, the child gains full control of a UTMA at age 21, and UTMA assets are counted heavily as the student’s assets in college financial aid formulas. So if college is the primary goal, a 529 is still the better tool.
Where Trump Accounts Shine
Honestly? When there’s a $1,000 federal deposit on the table. For families with children born between 2025 and 2028, claiming that free money is essentially a no-brainer. Beyond the seed deposit, Trump Accounts make sense for families who’ve already maxed out 529 contributions, who want to take advantage of an employer match, or who want a separate bucket of long-term savings outside of college funding.
Beyond the seed deposit, Trump Accounts shine as a separate bucket of long-term savings for parents who want to kick-start their child’s retirement. Because the account converts to a traditional IRA at age 18 and stays invested in U.S. equities the entire time, it’s purpose-built for money you want to leave alone for decades. Even a modest balance at age 18, left to compound, can grow into something meaningful by the time your child is in their 60s. For families who have education savings covered through a 529 and don’t need short-term flexibility, the Trump Account is a clean retirement head-start account.
For most families, though, the right answer isn’t “choose one.” It’s coordinating Trump Accounts, 529s, Roth IRAs (when applicable), and other savings vehicles so they work together. That’s exactly the kind of planning we do every day for our clients.
Is a Trump Account Right for Your Family?
Here’s how we’d think about it for our clients:
- If you have a child born 2025–2028: Yes, open the account when the portal goes live to claim the $1,000. The federal contribution alone, if invested in a broad U.S. stock index over 18 years, could grow significantly.
- If you have an older child and you’re already saving in a 529 or Roth IRA: A Trump Account may be redundant. Stay focused on the tools that match the goal.
- If your employer offers a $2,500 Trump Account benefit: Consider participating—free or matched contributions are hard to walk away from, even with the account’s limitations.
- If you’re a grandparent looking for a clean way to gift: Trump Accounts can work, but compare them to a 529 (where Indiana’s tax credit may benefit you) or a UTMA account before deciding.
The point is that this is one more tool, not a replacement for thoughtful planning. As with any new account type, the rules will evolve as the IRS issues additional guidance, so it’s worth checking in with your advisor before and after the July launch.
Have Questions About Saving for Your Children or Grandchildren?
Every family’s situation is different, and the right mix of savings tools depends on your goals, your timeline, and what’s already in place. As a Fee-Only wealth management firm in Fort Wayne, Galecki Financial Management helps families across Northeast Indiana coordinate the pieces—Trump Accounts, 529 plans, Roth IRAs, and beyond—so they work together. To schedule a meeting, call (260) 436-8525 or email [email protected].
Frequently Asked Questions
When can I actually open a Trump Account for my child?
Contributions can’t be made until July 4, 2026. The election to open an account is made by filing IRS Form 4547, either with your 2025 tax return or through the online portal at trumpaccounts.gov, which is expected to launch in summer 2026.
Does my child need to be born in 2025 or later to have a Trump Account?
No. Any child under 18 with a Social Security number can have a Trump Account. The $1,000 federal seed deposit is what’s limited to children born between January 1, 2025, and December 31, 2028. Older children can still open and fund accounts, they just don’t get the seed money.
Can grandparents contribute to a grandchild’s Trump Account?
Yes. Anyone can contribute, including grandparents, aunts, uncles, and family friends. All individual contributions combined are capped at $5,000 per child per year (indexed for inflation after 2027). Only a parent or legal guardian can open the account, however.
Are contributions tax-deductible?
No. Contributions from individuals are made with after-tax dollars and are not deductible. Earnings grow tax-deferred while the child is under 18. When withdrawals begin after age 18, the earnings portion is taxed as ordinary income.
How is a Trump Account different from a 529 plan?
Three big differences. First, 529 plans are designed for education expenses and offer tax-free withdrawals when used for qualified costs; Trump Accounts don’t. Second, Indiana offers a state income tax credit of up to $1,500 per year for 529 contributions, which Trump Accounts don’t qualify for. Third, the parent stays in control of a 529; with a Trump Account, the child takes full ownership at 18.
What can the money be invested in?
Only mutual funds or ETFs that track a U.S. stock index (like the S&P 500) with annual expenses below 0.1 percent. No individual stocks, no bonds, no international funds, and no actively managed strategies during the growth phase.
What happens if my child needs the money before age 18?
Generally, no distributions are allowed during the growth phase, except in limited cases (a qualified rollover, correction of an excess contribution, or the death of the beneficiary). A key consideration: the money is locked up until age 18.
How do Trump Accounts affect contributions to other retirement accounts?
They don’t. Trump Account contributions are separate from IRA and 401(k) limits. A teenager with earned income can contribute to a Roth IRA and still have a Trump Account funded the same year.
About Galecki Financial Management
Galecki Financial Management is a fee-only wealth management firm that rejects “business as usual” by prioritizing active listening and transparent, time-based compensation. Their experienced team provides comprehensive services (ranging from estate planning to cash-flow analysis) to help families identify and pursue their long-term financial goals. They focus on a friendly, casual, and client-centered approach to keep your financial success their only incentive.