Trump Accounts Are Officially Live: Here's What Families Should Know

On July 4, Trump Accounts officially launched. For an industry that usually measures rollouts in years, this one moved at record speed. Families have been asking us for years how to get their kids started early, and this is the federal government giving everyone a way in.

Just one year after the accounts were authorized under 2025’s One Big Beautiful Bill Act, parents can now officially open and fund them, employers can start contributing, and children born between 2025 and 2028 are eligible for a one-time $1,000 seed deposit from the federal government.

This launch is a big moment, and here's what it means for families today.

Trump Accounts: Everything You Need to Know

Trump Accounts are tax-advantaged investment accounts set up in a child's name. The account belongs entirely to the child (the beneficiary), and the parent or legal guardian serves as the sole custodian until the beneficiary turns 18.

Who Is Eligible?

Any U.S. child under 18 with a valid Social Security number can have a Trump Account opened on their behalf. Kids born between January 1, 2025, and December 31, 2028, may also qualify for a one-time $1,000 federal seed deposit, with no contribution required to get it.

How Much Can Be Contributed, and By Who?

The total cap is $5,000 per child per year, on top of whatever the government seeds. Parents, family members, friends, and employers can all contribute, with some key distinctions:

• Contributions made by individuals, such as parents or friends, are made with after-tax dollars.
• Contributions made by businesses are treated differently. Employers can contribute up to $2,500 of that $5,000 cap on a pre-tax basis, meaning the business’s contributions don't count as taxable income for the employee. However, the cap of pre-tax contributions is to the employee, it is not per account. So, if an employee has two Trump Accounts, the employer pre-tax contribution is limited to $2,500 for the employee. The employee could elect to have any employer contribution split across accounts, but the cap is still $2,500, not $2,500 per account.
• The employee could also elect a pre-tax contribution to the Trump Account if the employer offers what is called a Cafeteria Plan under Section 125. The nuance of any pre-tax contribution, whether from the employer or the employee, is that it can only go into an account that is for the direct dependent of the employee. This follows the rules of other Cafeteria Plan benefits.

Families can also choose to let the initial $1,000 sit and grow untouched, without funding the account with additional contributions.

What Is the Money Invested In?

The Treasury has designated an S&P 500 index fund as the default option, with additional broad U.S. stock index funds expected in the coming months. It's a diversified approach built for long-term growth over a long time horizon. Fees are capped by law at 0.10%.

When Can the Money Be Used?

The funds can be used after the child turns 18. At that point, money in the account can be withdrawn penalty-free for a specific set of qualified expenses, including paying for education or buying a first home.

Either way, the funds are taxed as ordinary income when withdrawn. Non-qualified expenses face a 10% penalty on top of the ordinary income tax, whereas qualified expenses face the ordinary income tax only. After 18, the account largely follows standard IRA rules.

While some may use the money when it becomes available at 18, many may plan to use the funds as a base for their long-term retirement savings. The best offense for a successful retirement outcome is starting early and being consistent with contributions.

What Does “Tax-Advantaged” Mean in This Case?

Money saved in a Trump Account grows "tax-deferred," meaning families don't pay taxes each year as the investments grow, but instead pay taxes on the growth when the funds are withdrawn.

For example, an account has $1,000 saved, and through investments, it grows to $10,000 by the time the child turns 18. If the funds are used for a qualified expense, such as paying for college or a first home purchase, it avoids the 10% penalty that would normally apply to money pulled out before retirement age. In this case, the original $1,000 comes out tax-free, and the $9,000 growth gets taxed as ordinary income.

There's also a tax incentive for businesses, where employer contributions of up to $2,500 per child are tax-deductible for the business and are not counted as taxable income for the employee.

How Can a Trump Account Be Opened?

Families can open an account by filling out IRS Form 4547. There are a few ways to do so:

• From within the Trump Accounts app,
• As part of your annual tax filing, or
• Through the IRS's online portal, called Individual Online Account, or IOLA.

Once the account is opened, everything can be managed through the app or at TrumpAccounts.gov.

Training Wheels, Not a Replacement

Trump Accounts are complementary and not necessarily a replacement for the accounts families already rely on.

A 529 is still the right tool for college savings. A 401(k) is still the backbone of retirement planning. An Emergency Savings Account (ESA) is a critical addition to that mix, giving savers a cushion for unexpected expenses. Achieving a Better Life Experience (ABLE) can be an excellent place for people with disabilities to save and invest for the future without putting essential benefits like SSI or Medicaid at risk.

What a Trump Account does is give parents and their children an easy way to start saving early and to introduce financial literacy and education to a broad segment of the population that can help improve knowledge and awareness of concepts like the importance of saving, compound growth, the time value of money, and the overall importance of long-term investing.

The real advantage here is the head start. A child who grows up watching an account grow and learning some basic financial principles is a lot more likely to be equipped to understand and use tax-advantaged accounts like a 401(k) when the time comes.

So far, this has all been about families. But employers have a role to play here, too.

What This Means for Employers

More than 50 employers, including Vestwell, have already committed to contributing to employees' Trump Accounts. The Department of Labor also recently clarified that most employer contributions may not trigger ERISA coverage, meaning employers won't have to manage fiduciary duties, reporting, and administrative work that come with running a regulated retirement plan. That removes a barrier that may have kept some employers from participating.

Another Lever to Pull for Attracting and Retaining Top Talent

Just like a 401(k), contributions to a Trump Account can be used as a retention tool.

Family-focused financial benefits, in particular, are becoming table stakes rather than a nice-to-have. In fact, 73% of employees would consider leaving their current roles if it meant gaining better family benefits.

Contributing to a Trump Account is a way to show employees you're invested in their family's future.

What's Next

The Treasury has moved quickly to get this program off the ground, but this is really just Phase One. Adding to the momentum, Frank Bisignano, Chief Executive of the Internal Revenue Service and Commissioner of the Social Security Administration, will lead the implementation and expansion of Trump Accounts.

There's more guidance coming, particularly around rollovers and how the accounts will work in practice over time. For now, the accounts are open, the app is live, and millions of families have already signed up. Whatever comes next, the goal hasn't changed: get more people investing, earlier, turning that first $1,000 into the start of a habit.

All content is provided for general information purposes and should not be construed as individualized investment advice. All investments involve risk, and past performance is not a guarantee of future results. Investments in stocks and bonds are subject to risk of economic, political, and issuer-specific events that cause the value of these securities to fluctuate. International investments are subject to additional risks such as currency fluctuation, political instability, and adverse economic conditions. Fixed income securities are subject to increased loss of principal during periods of rising interest rates and may be subject to various other risks, including changes in credit quality, liquidity, prepayments, and other factors. Inflation-protected securities may react differently from other debt securities to changes in interest rates. All investing involves risk, including possible loss of principal. Vestwell does not provide legal, financial, tax, or investment advice to individuals. Investors should consider the investment objectives, risks, and charges and expenses of the funds carefully and consider engaging their own financial professional before making any investment decisions.