Trump Accounts 101

While many question marks remain regarding the details on how the Trump Accounts will work, the broad strokes have been painted. Hayden Adams, Director of Tax Planning and Wealth Management Research at Charles Schwab, has put together a handy introduction to this new tax-advantaged savings and investment accounts for U.S. citizens 17 and younger.

The One Big Beautiful Bill Act (OBBBA) created a new tax-advantaged savings and investment account for children—called the Trump Account—that could give families a new way to save for their children's futures.

You could almost think of a Trump Account as a cross between a traditional individual retirement account (IRA) and a 529 savings account. In brief, these accounts will initially be eligible for after-tax contributions of up to $5,000 a year until the year the beneficiary reaches age 18. Like with an IRA, potential earnings can then grow tax-free and eligible withdrawals will generally be taxed at the beneficiary's income tax rate. However, withdrawals are generally prohibited until the beneficiary reaches age 18, at which point the account will need to be converted to an IRA.

Like with a 529, the beneficiary doesn't need to have earned income to accept contributions and nearly anyone can contribute to their account, but there's no requirement that the proceeds be used for education expenses—or any other purpose.

One of the more eye-catching features of Trump Accounts is that the OBBBA promises newborns born between Jan. 1, 2025, and Dec. 31, 2028, a federal grant of $1,000. We expect more details on how this will work in the coming months.

To learn more about Trump Accounts like when they launch, who is eligible, what are the contribution rules, and more visit www.Schwab.com.