Trump Accounts are now live. Here's how they work

The federal savings program went live on the Fourth of July, with the families of 6 million American children claiming accounts. Among those children are 1.4 million newborn babies who get $1,000 in seed money from the government.

At the heart of the Trump Accounts initiative is a federal pledge to deposit $1,000 into savings accounts for every child born between 2025 and 2028: an IRA for kids, basically. The program also is open to older children under 18, but without the seed money. 

Now, American children "come into the world with essentially no money and end up, at a pretty young age, being pretty rich," Trump said. 

To ring in the federal savings program, Trump rang the opening bell for the New York Stock Exchange and the Nasdaq, the first time the two markets have had a joint opening, the president said, and the first time the bell has sounded inside the Oval Office.

Those flanking the president included Michael and Susan Dell, who pledged $6.25 billion toward the initiative. Other wealthy donors and corporations followed suit.

Treasury Secretary Scott Bessent said 86% of Trump Accounts belong to children whose families earn incomes less than $200,000. That data point suggests Trump Accounts are not going primarily to the very wealthy, answering a criticism leveled by some economists.

Here’s what you need to know about Trump Accounts.

How do you open an account?

Parents or legal guardians have at least two options for opening an account. The easiest is to file IRS Form 4547 online at trumpaccounts.gov. The form will ask for dates of birth, Social Security numbers and contact information.

You also can file Form 4547 with a tax return.

After submission, the IRS will establish the Trump Account. Sometime later, "you’ll be contacted by the partner financial firm where your Trump Account will be held, with further instructions on how to complete the setup," the official website instructs.

In April, the Treasury Department announced that the Bank of New York Mellon Corp. would be a financial agent for Trump Accounts. The bank will partner with Robinhood to serve as custodians of the accounts and develop a Trump Account app.

How many people opened Trump Accounts?

Roughly 6 million children were enrolled in Trump Accounts, including 1.4 million babies who are eligible for the $1,000 federal seed money.

When will the $1,000 land in your account?

The seed money will land in your Trump Account sometime after July 4 and "as soon as practicable" after the account is authenticated, a Treasury guidance document says. Trump signaled Monday that at least some of the money was already deposited.

Who actually owns a Trump Account?

The Trump Account is owned by the child but administered by an adult until the child turns 18, according to Fidelity Investments.

When can you withdraw the funds?

On this point, the facts remain unclear.

IRS rules say you can take distributions from a Trump Account on Jan. 1 of the year you turn 18.

But that guidance may change to allow withdrawals only after the child’s 18th birthday, said Rita Assaf, vice president of retirement offerings at Fidelity. The reason: A child who hasn’t turned 18 doesn’t have the same legal rights as an adult.

From that point, Trump Accounts will work much like Individual Retirement Accounts. IRA rules generally penalize withdrawals before age 59½, with exceptions that include a qualified first-time home purchase, higher education and medical expenses. After age 59½, you can withdraw IRA funds without penalty.

Who will administer the accounts?

The U.S. Treasury will create and administer Trump Accounts, with BNY and Robinhood serving as custodians.

Eventually, families will be permitted to move the accounts to outside financial providers: presumably, the same companies that already administer 401(k) and IRA accounts.

How much can be contributed?

Contributions max out at $5,000 a year. But the onetime government "seed" contribution doesn’t count toward the annual limit, nor do contributions from governments and charities.

An employer may contribute up to $2,500 per year per employee, money that may be split among multiple children. Employees can divert pre-tax pay into a Trump Account. Those contributions count toward the $5,000 annual limit.

How are Trump Accounts taxed?

Individual contributions to Trump Accounts generally will come from after-tax dollars. When those funds are withdrawn, only the earnings are taxed, Vanguard advises.

Contributions from other sources, including employers and employees, charities and governments are pre-tax, so the full value of a withdrawal is taxed.

With so many potential contributors, differing tax rules and variable contribution limits, Trump Account holders may struggle to keep track.

"It’s unclear what happens if Granddad puts money in and your employer also puts money in," Williams said. "It’s unclear how all of that is going to be sorted out over time."