Special: What Are 'Trump Accounts'?

There's a brand-new type of savings account that starts accepting money on July 4th — officially called a Trump Account. You may have grandkids who qualify. 

So let's cut through the noise: what these are, what they're not, and how they actually work. No politics — just the mechanics. 

A Trump Account is a new, tax-advantaged investment account for children — technically a special kind of traditional IRA, created by the 2025 tax law. The child owns it; a parent or guardian runs it until the child turns 18. The headline feature: for kids who are U.S. citizens born between 2025 and 2028, the federal government chips in a one-time $1,000 seed — if you elect it. And that seed doesn't count against the yearly contribution limit. Here's how the taxes work — and this is where people get tripped up. The money you put in goes in after-tax — no deduction going in. While it's invested, it grows tax-deferred — you don't pay tax on the gains year to year. But when the money eventually comes out, the earnings are taxed as ordinary income. So it is not a Roth — it's not tax-free growth. Think of it as "pay no tax now, pay tax on the growth later." A few more things it's not. It's not a 529 — it's not just for college; it's far more flexible. It's not a guarantee — the money's invested in the market, in low-cost index funds tracking the broad U.S. market, like the S&P 500, so it rises and falls. And it's not a piggy bank you can raid — generally, no withdrawals until the year the child turns 18. Who can put money in? Just about anyone — parents, grandparents, even employers. The key number: all the individual contributions combined are capped at $5,000 a year per child, and that limit rises with inflation over time. So if Mom and Dad put in $3,000, a grandparent can add $2,000 — but together, you can't top five. It has to be cash, and — unlike a regular IRA — the child doesn't need a job to qualify. That's what makes it work for a newborn. So what does it become? Think of it in two phases. From birth until the year the child turns 18, it's locked — money goes in and grows, but nothing comes out. Then, starting the year they turn 18, it essentially becomes a regular traditional IRA. Now it's accessible — but the traditional-IRA rules kick in. Your own contributions can come back out tax-free, because you already paid tax on them. But the earnings — and that government seed — get taxed as income when withdrawn, at any age. And if they pull money out before age 59½, that taxable portion generally takes a 10% early-withdrawal penalty on top — with the usual IRA exceptions, like a first home or certain education costs. Bottom line: a Trump Account is a tool. Whether it belongs in your family's plan depends on your goals, your taxes, and how it fits alongside 529s and everything else. But for a lot of grandparents, a $1,000 head start for a grandchild is hard to ignore. If passing a head start to the next generation is on your mind, that's a conversation worth having. Got a question? Drop it in the comments — that's what Ask Jose is for.