Planning your child’s financial well-being is a priority for many families. With the rising costs of education, housing, and starting a business, finding effective ways to save for the future is more important than ever.  

Recently, as part of the “Big Beautiful Bill,” a new type of savings account—officially called “Trump Accounts” and sometimes informally known as “MAGA Accounts”—has been introduced to help families support their children’s long-term goals. Here’s what you need to know about these accounts, how they compare to existing options, and what to consider before getting started. 

Purpose

These are new tax-advantaged savings accounts designed to help children save for future education, homeownership, and entrepreneurial expenses.

Eligibility

• Parents or legal guardians can open an account for a child under the age of 8. 

• Only one account is allowed per child. 

• The child must be a U.S. citizen, and at least one parent must have a valid Social Security number (both parents if married).

Government Seed Contribution (Pilot Program)

• For children born between January 1, 2025, and December 31, 2028, the federal government will automatically contribute a one-time $1,000 to the account, unless parents opt out. 

• This initial contribution is intended to give the accounts a head start. 

Additional Contributions

• Parents, relatives, other taxpayers, and employers can contribute up to $5,000 annually (adjusted for inflation) until the child turns 18. 

• Contributions from governments or qualified charities are not subject to this $5,000 annual limit. 

• Employer contributions are tax-free up to $2,500 per year (adjusted for inflation); amounts above that are treated as taxable income to the employee. 

Investments

• Funds in Trump Accounts must be invested in a low-fee, diversified U.S. equity portfolio that tracks a U.S. stock index.

Tax Treatment

• Contributions are made with after-tax dollars (not tax-deductible). 

• Contributions and earnings grow tax deferred. 

• Qualified withdrawals (for higher education, post-secondary credentialing, obtaining a small business loan, or first-time home-buying) are taxed at the long-term capital gains rate- In many cases, this will be 0%.  

• Non-qualified withdrawals are taxed as ordinary income and may be subject to an additional 10% early withdrawal penalty. 

Withdrawal Rules

• Withdrawals are generally not permitted until the child reaches the age of 18. 

• At age 18, account holders can access up to 50% of their funds for qualified expenses. 

• At age 25, account holders gain access to the full balance, but still only for qualified purposes. 

• Funds remaining in the account at age 31 are deemed disbursed and taxed as normal income. 

These accounts are distinct from 529 college savings plans, offering broader qualified uses (homeownership, small business) but with different tax treatment on withdrawals and investment options.  

 

Is The Trump Account the Right Choice for Your Family?

The introduction of these new savings accounts as part of the Big Beautiful Bill provides families with another option for planning their children’s financial futures. Deciding whether to open one of these accounts depends on your family’s goals, risk tolerance, and financial situation. They may offer advantages for families seeking flexibility beyond education savings, but it’s important to weigh the pros and cons and compare them with existing options like 529 plans. 

If you’d like personalized guidance or want to explore how these accounts might fit into your broader financial plan, we’re here to help. Taking the time to plan now can help set your child up for a more secure and flexible financial future.