Trump Accounts give newborns $1,000 with strict rules
The new child investment accounts offer a federal starter deposit, but withdrawals, taxes and investment choices limit how families can use them.
By Sofia Marchetti · World Affairs Correspondent
3 min read
The U.S. government began putting $1,000 into new Trump Accounts for eligible children on July 4, 2026, according to the Treasury Department. The accounts could give newborns an early start on saving, but Boston University business professor Jay L. Zagorsky says their rules make them a poor substitute for college or first-home savings plans.
The program applies to babies born in calendar years 2025 through 2028, according to IRS guidance cited by Zagorsky. Parents or guardians must ask the IRS to create the account; it is not opened automatically.
How the accounts work
Zagorsky describes Trump Accounts as traditional individual retirement accounts for children, with a major difference: children do not need job income for contributions to be made. The FDIC says the accounts are structured as traditional IRAs.
The Treasury Department says the money currently goes into State Street Bank’s SPDR Portfolio fund, which tracks the S&P 500. State Street’s fund materials show that about one-fifth of the fund is tied to Nvidia, Apple, Microsoft and Amazon because those companies are among the largest publicly traded U.S. companies.
The Treasury says more investment choices are expected later, though Zagorsky notes that the options are still intended to follow broad stock-market performance. That means families are taking stock-market risk, and the largest U.S. companies will receive a substantial share of the investment exposure.
Extra contributions are allowed
The federal $1,000 deposit is only one possible source of funding. Zagorsky says relatives may contribute up to $5,000 a year, while a parent’s employer or a charity may add as much as $2,500 annually.
Some states, companies and foundations have also pledged money, according to public announcements cited by Zagorsky. He points to Michael and Susan Dell’s plan to provide $250 for the first 25 million children under age 10 who sign up and live in middle- to lower-income neighborhoods.
Congressional funding for the federal starter deposits expires Sept. 30, 2034, according to the law cited by Zagorsky. That leaves time after the 2028 birth-year cutoff for families to set up accounts for eligible children.
Growth projections depend on the market
The program’s website, trumpaccounts.gov, emphasizes long-term compounding. It estimates that a $1,000 deposit with no added money could grow to $6,000 by age 18, $15,000 by age 27 and $243,000 by age 55.
Zagorsky says those figures assume annual stock-market growth of more than 10%, a rate some financial planners told Fortune they view as too optimistic. He says the same deposit would grow to less than $9,000 over roughly a half-century if stock prices rose 4% a year.
The program website includes a warning that outcomes are not guaranteed, according to Zagorsky.
The main limits
Zagorsky identifies several restrictions that families should weigh before adding their own money:
- No withdrawals are allowed until the child turns 18.
- After age 18, the account can be rolled into another IRA, according to the Center for Retirement Research at Boston College.
- Withdrawals may face ordinary income tax unless used for education, a home purchase or disaster recovery, according to guidance cited by Zagorsky.
- Family contributions do not reduce taxable income, unlike some traditional IRA contributions.
- At age 18, the child controls the money and parental oversight ends.
Zagorsky says the accounts may help improve U.S. saving, which Federal Reserve data show fell from more than 13% of disposable income in 1975 to under 4% in 2025. He also says the accounts are closer to retirement starter funds than 529 college savings plans, because Congress designed the two programs for different purposes.
This story draws on original reporting from Fortune.