Trump Accounts: The New Child Savings Vehicle Under the One Big Beautiful Bill Act

Key findings

1. The One Big Beautiful Bill Act established “Trump Accounts,” a new tax-advantaged investment account for minors that blends features of an IRA and a 529 plan, giving every eligible child born between 2025 and 2028 a $1,000 federal head start.
2. The accounts open the door to significant compounding: the White House Council of Economic Advisers projects a $1,000 seed alone could grow to roughly $5,800 by age 18, and up to $303,800 if a family maximizes annual contributions.
3. Families, employers, and philanthropies all have new avenues to contribute — up to $5,000/year from family and friends and $2,500/year pre-tax from employers — with funds held in low-cost, capped-fee S&P 500-tracking index funds.
4. Private philanthropy has already mobilized at a large scale, including a $6.25 billion pledge from Michael and Susan Dell aimed at seeding accounts for 25 million lower- and middle-income children, plus employer-matching programs from companies like Schwab, Uber, and Mastercard.
5. The program extends access to equity market investing to millions of children who might not otherwise have an investment account, giving many a modest ownership stake in the market from birth.

Full report

Trump Accounts, established under the 2025 One Big Beautiful Bill Act, give eligible newborns a $1,000 federal deposit into a new tax-advantaged investment account, with additional room for family, employer, and philanthropic contributions invested in U.S. equity index funds until the beneficiary turns 18. The program has already drawn substantial private and corporate support, including billions in philanthropic pledges aimed at expanding access for lower- and middle-income families. By combining a federal head start with new incentives for private saving, Trump Accounts aim to broaden participation in equity markets and give the next generation an early stake in long-term wealth building. # Trump Accounts: The New Child Savings Vehicle Under the One Big Beautiful Bill Act **By Transparency Report Research Staff** **August 2026** The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, established a new tax-advantaged savings vehicle for minors known as “Trump Accounts.” The administration has billed the program as a historic initiative to give American children a financial head start and foster a “shareholder society.” It introduces both federal seed funding for newborns and new avenues for tax-advantaged private contributions [1]. This report details the mechanics of Trump Accounts, the role of private philanthropy, and the ongoing policy debate surrounding their distributional impact. ## Account Mechanics and Eligibility Trump Accounts function as tax-advantaged investment vehicles, described by analysts as a hybrid between a traditional Individual Retirement Account (IRA) and a 529 college savings plan [2]. The accounts are held in the child's name, with a parent or guardian serving as the sole custodian until the child reaches age 18 [3]. ### Eligibility and Federal Seed Funding Any child who is a U.S. citizen, has a valid Social Security number, and is under the age of 18 is eligible to have a Trump Account opened on their behalf [2] [4]. A central feature of the program is a one-time federal grant of $1,000, which is exclusively available to American children born between January 1, 2025, and December 31, 2028 [4]. The Treasury Department makes this deposit directly into the child's account. For eligible children whose parents do not proactively open an account, the federal government is mandated to open one on their behalf [5]. ### Contribution Limits and Rules Trump Accounts permit multiple funding pathways, though the tax treatment varies by the source of the contribution. Individuals (family and friends) can contribute up to $5,000 annually per child, with contributions made in after-tax dollars [2]. The $5,000 limit will be indexed to inflation beginning in 2028 [2]. Employers may contribute up to $2,500 annually to the account of an employee’s child using pre-tax dollars. This amount does not count toward the employee’s taxable gross income, but it does count toward the overall $5,000 annual limit [2] [5]. Contributions made by state governments, the federal government, or qualified 501(c)(3) charitable organizations are tax-free and do not count toward the $5,000 annual limit [6]. ### Investment Restrictions and Withdrawals By law, funds within a Trump Account must be invested in qualified mutual funds or exchange-traded funds (ETFs) that track the S&P 500 or a similar index composed primarily of U.S. equities [6]. The legislation caps management and fund expense fees at 0.10% [2]. The accounts grow on a tax-deferred basis [2]. Withdrawals are strictly prohibited until the beneficiary reaches age 18 [5]. Upon the beneficiary turning 18, the Trump Account must be converted into an IRA, and standard IRA withdrawal rules apply [2]. Withdrawals of the original after-tax contributions are tax-free, while withdrawals of pre-tax contributions and accumulated investment earnings are taxed at the beneficiary's ordinary income tax rate [2]. Any withdrawals made before age 59½ that do not meet standard IRA exemptions (such as first-time home purchases or qualified education expenses) are subject to an additional 10% early withdrawal penalty [2]. ## Private Sector and Philanthropic Participation The Trump administration has actively solicited private sector and philanthropic involvement to supplement the federal government's $1,000 seed funding. This initiative, dubbed “The 50 State Challenge,” encourages wealthy individuals and corporations to backfill accounts or provide matching funds [1]. In December 2025, Michael and Susan Dell announced a $6.25 billion donation to the program [1] [7]. Their contribution is designed to fund $250 deposits into the accounts of 25 million children aged 10 and under who live in ZIP codes with a median family income below $150,000 [7]. Other notable philanthropic commitments include a $75 million pledge by Ray and Barbara Dalio to fund accounts for children in Connecticut [1]. Additionally, numerous major U.S. corporations — including Charles Schwab, Uber, Bank of New York Mellon, Mastercard, and Dell Technologies — have announced programs to match employee contributions to Trump Accounts [1]. ## Distributional Impact and Policy Debate The stated goal of Trump Accounts is to democratize private ownership and leverage the power of compound interest. The White House Council of Economic Advisers projects that a $1,000 deposit at birth, with no further contributions, would grow to approximately $5,800 by age 18, assuming historical U.S. stock market returns [4]. If a family maximizes the $5,000 annual contribution limit, the account could reach an estimated $303,800 by age 18 [4]. However, the reliance on voluntary family and employer contributions has sparked debate over the program's distributional impact and its effect on wealth inequality. ### Comparison to “Baby Bonds” Trump Accounts share conceptual similarities with “Baby Bonds,” a policy proposal popularized by economists Darrick Hamilton and William Darity [7]. However, the two models differ fundamentally in their approach to equity. Baby Bonds are designed as a progressive trust fund. The government provides a seed deposit for every child, but the deposit size and any later government contributions scale inversely with parental wealth. As a result, children from the poorest households receive the largest endowments — up to $50,000 by age 18 in some proposals [7]. In contrast, Trump Accounts provide a flat $1,000 federal seed available only to children born within a four-year window. The bulk of wealth accumulation then depends on private contributions [7]. Critics argue this structure primarily subsidizes the intergenerational transfer of wealth for families who already possess the disposable income to maximize the $5,000 annual limit [7]. “A wealthy family could build a $150,000 nest egg by the time their child turns 30,” noted Connecticut Treasurer Erick Russell. “Meanwhile, a child from a low-income family is likely to be left with about $2,500” [7]. ### Tax Code Complexity Tax policy analysts have also criticized the accounts for adding unnecessary complexity to the federal tax code. The Tax Foundation notes that the U.S. tax code already contains at least 11 different tax-advantaged savings vehicles (including 529 plans, HSAs, and various IRAs) [6]. Roth IRAs and 529 college savings plans already allow tax-free withdrawals for education, and Trump Accounts’ tax benefits are generally less generous than both. Analysts suggest this leaves little additional incentive to save beyond the initial federal and philanthropic seed money [6]. ## Conclusion Trump Accounts represent a novel approach to child savings, combining a targeted federal cash grant with a new tax-advantaged investment structure restricted to U.S. equities. While the $1,000 federal seed and high-profile philanthropic donations ensure a baseline level of asset ownership for millions of children, the program's ultimate impact on long-term financial security will largely depend on a family's ability to make voluntary annual contributions. As a result, even as the accounts expand access to equity markets, they are likely to yield the most significant financial benefits for middle- and upper-income households. ## References [1] U.S. Department of the Treasury. “Trump Accounts: The Defining Policy of America's 250th Anniversary.” January 28, 2026. https://home.treasury.gov/news/press-releases/sb0372 [2] Charles Schwab. “What to Know About Trump Accounts." July 29, 2026. https://www.schwab.com/learn/story/trump-accounts [3] TrumpAccounts.gov. "The American Dream starts now." https://trumpaccounts.gov/ [4] The White House. "Trump Accounts Give the Next Generation a Jump Start on Saving." August 29, 2025. https://www.whitehouse.gov/research/2025/08/trump-accounts-give-the-next-generation-a-jump-start-on-saving/ [5] Foley & Lardner LLP. "Trump Accounts: The New Child Savings Account Established Under the One Big Beautiful Bill Act." July 9, 2025. https://www.foley.com/p/102ksm3/trump-accounts-the-new-child-savings-account-established-under-the-one-big-beaut/ [6] Tax Foundation. "'Trump Accounts' Could Be Better. Here's How." February 24, 2026. https://taxfoundation.org/blog/trump-accounts-could-be-better/ [7] Brookings Institution. "What are Trump accounts? What are Baby Bonds?" December 4, 2025. https://www.brookings.edu/articles/what-are-trump-accounts-what-are-baby-bonds/