“Trump accounts” were introduced in Public Law 119-21, known as the One Big Beautiful Bill Act (OBBBA), under Section 530A of the tax code.1 These accounts will work like individual retirement accounts (IRAs). However, they have their own limits for contributions, investment rules, and distribution guidelines. The IRS published a notice on Dec. 2, 2025, that outlines Trump account rules.2
In this article, we explore the rules to help you determine whether Trump accounts are the right fit for you and your financial plan.
Establishing an account
Trump accounts are expected to become available at qualifying banks and trustees by July 2026.
You can only open an account for the exclusive use of an individual for whom an election is made via IRS Form 4547 or online at trumpaccounts.gov. The individual must have a social security number and be under the age of 18 before the end of the calendar year that the election is made.
| Note: There can only be one Trump account per beneficiary at any time. If parents and grandparents want to make contributions for a new baby or grandbaby, they must all go into the same account. |
Understanding the growth period
It is important to explain what “growth period” means before moving on. The Trump account growth period starts when a child is born. It ends before the year the child turns 18.
For example, a child born on Oct. 1, 2025, would turn 18 on Oct. 1, 2043. Therefore, the last day of the growth period for their account is Dec. 31, 2042.
Making contributions
There are five types of Trump account contributions that can be made during the growth period, but not before July 4, 2026:
- A pilot program contribution of $1,000, that must be elected, for an eligible child born in 2025 to 2028.
- Qualified general contributions from states, Indian tribal governments, or 501(c)(3) tax-exempt organizations.
- Employer contributions are limited to the lesser of $2,500 or $5,000, less contributions made under #5 below.
- Qualified rollover contributions.
- Standard contributions from other sources such as the beneficiary, parents, or any other person. Subject to an annual limit of $5,000 in coordination with #3 above.
| Contribution Type | |||||
| Pilot | Qualified | Employer | Rollover | Standard | |
| Creates income for beneficiary | No | No | No | No | No |
| Beneficiary needs earned income | No | No | No | No | No |
| Creates basis | No | No | No | Carryover | Yes |
| Deductible by contributor | NA | NA | Yes | NA | No |
| Annual contribution limit | NA | NA | $2,500 | NA | $5,000 |
You must make contributions in the tax year of their allocation. This is unlike IRAs where taxpayers have until April 15 of the following year to make contributions that are allocated to the previous year.
Additionally, contributions to a Trump account will NOT reduce any eligible IRA contribution limit. In other words, a beneficiary of a Trump account can receive $5,000 into that account and $7,500 (2026 limit) into an IRA provided they meet the rules for such contributions.
Selecting investments
During the growth period, you may only invest Trump account funds in eligible investments. These include any mutual fund or exchange traded fund (ETF) that tracks an index of primarily U.S. companies, does not use leverage, and has expense ratios less than 0.1%.
Taking distributions
During the growth period, you cannot make distributions. The only exceptions are for qualified rollovers, ABLE account rollovers, excess contributions, and distributions after the beneficiary’s death.
Distribution may begin on January 1 of the year the beneficiary turns 18 and are taxed like IRA distributions. If the account has basis for after-tax contributions, distributions will follow the pro rata rule. This means part of each distribution will be taxed, while another part will be a return of basis, which is tax-free. Lastly, a 10% penalty may apply to the taxable portion if an exception does not apply.
Note that ABLE account rollovers can only happen in the year the beneficiary turns 17. You cannot do it before that. After the growth period, which is when the beneficiary turns 18, you lose the ability to make that rollover.
If the Trump account beneficiary dies after the growth period, the account turns into an inherited IRA. It will then follow the standard rules for required minimum distributions (RMD) for inherited retirement accounts.
However, if the Trump account beneficiary dies within the growth period, the account is fully liquidated. The fair market value of the account, minus any basis, is taxable. This tax applies to the inheriting beneficiary. If the estate inherits, the tax is reported on the original account beneficiary’s final income tax return.
Moving forward after the growth period
After the growth period ends, the Trump account is subject to all the same contribution limits, earnings requirements, and distribution rules of IRAs. However, Trump accounts cannot receive contributions from SEP or SIMPLE IRA plans. They also cannot be combined with other IRAs when allocating basis across Trump accounts and IRA plans.
The notice states that after the growth period, IRA rules will apply to Trump accounts. This includes rules about contributions, distributions, required minimum distributions, rollovers, Roth conversions, ordinary income taxation, and reporting. In Q&A-7, it states that after the growth period, a Trump account can be transferred. This transfer can be to an IRA or another eligible retirement plan.
So, upon reaching the year the beneficiary turns 18, the Trump account can be rolled over to an IRA. This would remove the tracking and separation between a beneficiary’s Trump account and IRA. There would be no Trump account anymore. In this case, it may be prudent for parents to do a Roth conversion while their kids have little to no other income, making the tax cost less impactful.
Making a decision
Starting a Trump account and electing the pilot program $1,000 is beneficial for anyone with children born in 2025, 2026, 2027, or 2028. Recently, Michael and Susan Dell announced a $6.25 billion dollar donation to fund $250 into approximately 25 million accounts for children.3 If eligible, it may make sense to take advantage.
Beyond receiving “free” money, the accounts are a great way to start kids saving for their future. While the funds may be utilized for college, since they can be converted into a Roth IRA and saved for retirement, they’re potentially allowed a total growth window of more than 65 years! If parents, grandparents, or even the kids themselves have the wherewithal to fund these vehicles, we fully support their use.
Example: Child is born in 2026 and their parents set aside $5,000 into their Trump account each year for 18 years ($90,000 total). At age 18, the child converts the funds into a Roth IRA. Assuming a return of 8% from birth until age 65, the child could have approximately $7.5 million of tax-free money for retirement!
Regarding using Trump accounts vs. 529 plans for college, it should be noted that the 529 plan can provide more benefits. While contributions to both are non-deductible, states may allow a deduction for contributions made to in-state 529 plans. Plus, 529 plans have a more diversified investment selection and distributions for qualified education expenses are tax-free.
Getting started
The value that this new account type may offer is worth considering. The rules are fairly straightforward but, as with any new account, they will take some time to digest.
If you have questions about Trump accounts and whether they’re the right choice for you and your family, reach out to your Mercer Advisors wealth advisor.
Not a Mercer Advisors client? We can help you determine if a Trump account is the right fit, based on a tailored and comprehensive wealth management solution that integrates financial planning, investment management, tax planning and preparation, estate planning, insurance solutions, and more. Let’s talk.
| FAQs |
| Q: When can I open a Trump account?
A: The accounts should be available to open by July 4, 2026. Q: How many Trump accounts can I open at once for my child? A: You can open just one. If you do a rollover from one Trump account to another, you must close the old Trump account. Q: Can I have a Trump account and a 529 plan for my child? What about a Trump account and a custodial IRA? A: Yes, having a Trump account does not exclude owning other types of accounts. Q: When can contributions be made? A: You can make contributions any time after July 4, 2026, and before the year the beneficiary reaches age 18. Q: What happens when a Trump account beneficiary turns 18? A: Beginning January 1 of the year the beneficiary turns 18, contributions must stop. While the account is still considered a Trump account, it functions like an IRA from then on. Q: Can Trump accounts be rolled into an IRA or Roth IRA? A: Yes, Trump account rollovers can start in the year the beneficiary reaches age 18. Q: What are the contribution types? A: A pilot program $1,000, qualified general contributions, employer contributions, qualified rollovers, and standard contributions. Q: What is a pilot program $1,000? A: Children born in 2025, 2026, 2027, or 2028 will receive $1,000 from the Treasury upon making an election via IRS Form 4547 or online at trumpaccounts.gov. This amount does not reduce the contribution limit for standard or employer contributions. Q: What are qualified general contributions? A: Qualified general contributions are from states, Indian tribal governments or 501(c)(3) tax-exempt organizations. These contributions do not reduce the contribution limit for standard or employer contributions. Q: What is a qualified rollover? A: Qualified rollovers can occur from an existing Trump account directly to a new Trump account. This does not reduce contribution limits for standard or employer contributions. Q: What is a standard contribution? A: Standard contributions are made by the beneficiary, parents, or any other person. Q: Does the beneficiary need earned income to receive contributions to their Trump account? A: No, the beneficiary does not need to have earned income. This is a key difference for Trump accounts vs. IRAs for children. Q: Does the contribution create taxable income to the beneficiary of the Trump account? A: No, the contributions are not considered taxable income. Q: Does the contribution create basis (after-tax contributions)? A: Yes, there is Trump account basis for standard contributions only. Q: Is the contribution deductible by the contributor? A: No, contributions made by the contributor are not deductible, but employer contributions are deductible. Q: What are the contribution limits for Trump accounts? A: The annual contribution limit is $5,000 for standard contributions and $2,500 for an employer. Q: Does the employer contribution reduce how much can be contributed under the standard method? A: Yes, the employer contribution lowers the limit for standard contributions (by the beneficiary, parents, or any other person). Q: Can I contribute to my child’s Trump account as well as their custodial IRA if they have earned income? A: Yes. The two contribution limits are separate. Q: What investments are allowed in Trump accounts? A: Trump account investment options include any mutual fund or exchange-traded fund (ETF) that tracks a U.S. index. These funds should not use leverage and must have an expense ratio of 0.1% or less. Q: Can I move some of the investment to cash as my child gets closer to age 18 and needs the money for college? A: No, this is not allowable according to Trump account distribution rules. Q: What happens if a Trump account beneficiary passes away before age 18? A: In this case the account is closed and liquidated. Either the account’s inheritor beneficiary or the deceased child (if their estate is the beneficiary) must recognize the fair market value of the account, less any basis, as taxable ordinary income. Q: What happens if a Trump account beneficiary passes away at age 18 or older? A: The account is treated as an inherited IRA and the RMD rules for an inherited IRA will apply. |
1“Sec. 530A Trump accounts.” Tax Notes, 2025.
2“Notice of intent to issue regulations with respect to section 530A Trump accounts.” IRS, Dec. 2, 2025.
3“What you need to know about ‘Trump Accounts’ and Michael and Susan Dell’s $6.25 billion donation.” Dec. 3, 2025.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy Hypothetical examples are for illustrative purposes only. Client experiences will vary, successful outcomes are not guaranteed
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