Trump Accounts: The New $1,000 Baby Bonus Every Family Should Know

This summer, the federal government began depositing real money into children’s investment accounts. Not a tax credit or deduction, but an actual $1,000 in your child’s name. If your child was born after January 1, 2025, you can claim it. Twins mean $2,000. More children before 2028 could mean thousands in free seed money.

These new Section 530A “Trump Accounts” launched on July 4, 2026. Millions have already been opened, though only some children qualify for the federal deposit. Here is what every frum family should know to make the most of this opportunity.

What Exactly Is a Trump Account? Think of it as a retirement account that begins at birth. Most people are familiar with a 401(k), a 529 college savings plan, or an IRA. A Trump Account functions similarly to a traditional IRA, except it begins as soon as a child receives a Social Security number rather than when he or she starts earning income.

Any child under age 18 with a Social Security number may have one, regardless of household income. A parent or legal guardian typically opens the account. Each child may have only one account.

The money is invested conservatively in broad stock market index funds. By law, assets may be invested only in low-cost index funds tracking broad U.S. equity indices, with at least 90% invested in American companies. The default investment tracks the S&P 500. Individual stocks, speculative investments, and active trading are not permitted. Annual management fees are capped at just 0.1%.

Except for limited circumstances, the money generally remains untouched until the child turns 18. On January 1 of that year, the account automatically converts into a traditional IRA, and legal ownership transfers entirely to the child.

Three Sources of Free Money: Families should be aware of three potential sources of funding.

The federal $1,000 deposit: Every U.S. citizen born between January 1, 2025, and December 31, 2028 is eligible for a one-time $1,000 contribution from the U.S. Treasury.

This deposit is not automatic. A parent or guardian must claim it by filing IRS Form 4547. The form may be completed through the Trump Accounts Portal, an IRS Individual Online Account, the official Trump Accounts app, or by mail. If no election is made, the child will not receive the deposit.

The Dell Foundation's $250 contribution: Michael and Susan Dell pledged billions of dollars in philanthropic funding to help children born between 2016 and 2024 who missed the federal eligibility window.

Eligibility is based on ZIP code rather than individual family income. Funding is limited and awarded on a first-come, first-served basis. Many Orthodox Jewish neighborhoods may qualify, making it worthwhile to check.

Employer contributions: Employers may contribute up to $2,500 annually to an employee's child's Trump Account without creating taxable income for the employee. Several large employers have already introduced matching programs.

These employer contributions count toward the overall annual contribution limit of $5,000 per child, which includes contributions from parents, grandparents, relatives, and employers combined.

Business owners in our community should pay attention. This benefit is relatively inexpensive to provide and could become an attractive recruiting and retention tool for employees raising large families.

Where the Fine Print Matters: Like every tax-advantaged account, Trump Accounts come with important rules.

Taxes on withdrawals: Unlike a 529 plan, where qualified education withdrawals are tax-free, or Roth IRAs, distributions from a Trump Account, including the original government contribution and all investment earnings, are generally taxed as ordinary income.

Early withdrawal penalties: After conversion to a traditional IRA at age 18, standard IRA rules apply. Withdrawals before retirement generally trigger both ordinary income tax and a 10 percent penalty, although exceptions exist for qualified higher education expenses, certain medical costs, and up to $10,000 toward a first-time home purchase.

Financial aid considerations: Early guidance suggests these accounts may be treated as a student's asset when determining eligibility for federal financial aid. Student-owned assets typically receive less favorable treatment than parent-owned 529 plans. Families expecting to qualify for need-based financial aid should discuss this issue with an advisor before making significant contributions.

How Big Could This Become? The greatest factor affecting long-term growth is not the government's initial $1,000 contribution. It is consistent annual family contributions. For families with sufficient cash flow, Trump Accounts can become an extraordinary retirement planning tool for the next generation. Even modest amounts invested year after year until 18 can dramatically increase the account's value through decades of additional compounding during adulthood.

Contributing the annual maximum of $5,000 for each of the first 18 years, assuming an 8 percent annual return, could grow the account to roughly $200,000 by age 18. If that money remains invested for another 50 years at the same average annual return, the balance could grow into the high seven figures. Time is the greatest advantage these accounts offer.

The Roth Conversion Opportunity: One strategy may be especially attractive. Once the account converts into a traditional IRA, the child may choose to convert some or all of it into a Roth IRA. Although income tax would be owed on the amount converted, future growth and qualified withdrawals from the Roth IRA could be entirely tax-free. Depending on the child's income and tax bracket, this could create substantial long-term tax savings.

Where Trump Accounts Fit Among Other Savings Tools: For families saving primarily for college, a 529 plan generally remains the better option because qualified education withdrawals are completely tax-free.

For children who earn income through babysitting, camp jobs, or other employment, a custodial Roth IRA often provides superior tax benefits. Trump Accounts are best viewed as a complement to these strategies rather than a replacement. Their greatest advantage is allowing retirement savings to begin years before a child earns his or her first paycheck.

The Most Important Investment: Perhaps the most important aspect of Trump Accounts has nothing to do with investing. Opening the account takes only a few minutes. Teaching a child the value of long-term investing takes 18 years. Those conversations may ultimately prove to be the most valuable investment of all.

At age 18, the account legally belongs to the child. Parents have no authority over how the money is used. Research on similar accounts suggests that many young adults withdraw a large portion of the balance shortly after gaining control, often to purchase a car, furnish an apartment, or cover other short-term expenses. However, with proper education, your child can continue to allow the funds to grow until retirement, resulting in a very sizable nest egg to support their retirement years.

As with any new federal program, regulations continue to evolve, and additional guidance is expected. Families should consult a qualified tax professional or financial advisor before making significant contribution decisions.