Key Takeaways
On October 1, 2026, the federal government opened an investment account for your child, and it did it quietly enough that most parents I talk to still haven't heard. Nobody filled out a form, and nobody signed anything. If your child has a Social Security number and hasn't turned 18, an account with their name on it is most likely sitting on a government server right now, waiting for somebody to come claim it.
It's called a Trump Account, and whatever you make of the name, the mechanics underneath it deserve fifteen minutes of your attention, because for families with babies and toddlers there's a real $1,000 involved, and for every family there's a claiming step that nobody is going to do for you.
The account comes out of the Working Families Tax Cuts, the tax law signed on July 4, 2025. The IRS describes a Trump Account as a new type of individual retirement account for eligible children, according to the IRS's Trump Accounts FAQ. Contributions became possible on July 4, 2026, and beginning October 1, 2026, the Treasury Secretary automatically enrolled eligible children, meaning kids with a valid Social Security number who won't turn 18 before the end of the year. The Bank of New York Mellon serves as the financial agent and Robinhood Securities is the brokerage provider and initial trustee.
So the account exists whether you asked for it or not. What does not exist yet, for most families, is anyone at the wheel.
Watch Out: Automatic enrollment is not the same thing as a claimed account. Until a parent claims and activates it, the family can't manage it, and the $1,000 deposit for eligible children never gets elected. Claiming happens through the Trump Accounts app, the Trump Accounts website, or your IRS Individual Online Account, and the child's name, Social Security number, and date of birth have to match Social Security Administration records exactly. If you've received IRS Notice CP318, follow its instructions.
If your child was born between January 1, 2025 and December 31, 2028, is a U.S. citizen, and has a Social Security number, the federal government will make a one-time $1,000 contribution to their account. That deposit requires an election, which a parent makes on Form 4547, and the whole thing can be done inside the same app or website where you claim the account.
This is money your child is already eligible for, and it simply sits unclaimed until a parent asks for it. Plenty of planning strategies are judgment calls that depend on your bracket and your goals, and this is not one of them. If your child qualifies, make the election.
Once the account is claimed, the rules are refreshingly short. Per the IRS's Working Families Tax Cuts page, authorized contributions from individuals and employers are allowed up to $5,000 per year, and the money must be invested in mutual funds or exchange-traded funds that track a U.S. stock index, such as the S&P 500. The investment menu is deliberately plain, broad index funds and nothing fancier, which for an account with a fifty-year horizon is a feature, not a limitation.
By the Numbers: Total contributions are capped at $5,000 per child per year. Within that cap, an employer can contribute up to $2,500 a year toward an employee's or dependent's account, and that employer money is generally deductible by the business and excluded from the employee's taxable income. Source: IRS, Working Families Tax Cuts, irs.gov; IRS Notice 2025-68.
Family contributions go in after tax, the growth is tax deferred, and the money is generally locked until the calendar year your child turns 18. From that point the account is treated like a traditional IRA with similar tax rules, which means it becomes your child's property, the earnings are taxed when they come out (the after-tax dollars your family put in come back untaxed), and the usual retirement-account rules about early withdrawals apply. Congress built a retirement account that starts at birth, then attached a $1,000 welcome gift for the newest arrivals.
The employer piece deserves its own sentence, especially if you own a business. A $2,500 annual contribution that your team member never pays income tax on is one of the least expensive new benefits on the shelf, and almost nobody knows it exists yet. If you employ parents, this is worth a conversation with your payroll and benefits people before the year turns.
The question I expect to hear most this fall is whether this replaces the 529 plan, and the answer is no. They're built for different jobs. A 529's qualified education withdrawals come out entirely tax free, while a Trump Account's earnings are taxed on the way out. A 529 stays under the parent's control indefinitely, while a Trump Account becomes your child's at 18, with everything that means about handing an eighteen-year-old a balance and a decision.
So the order of operations matters, and it depends on your family. Education goals, state tax deductions, how much you trust compounding versus control, and what you're trying to teach all pull on the answer. We've seen families where the 529 clearly comes first and families where the employer match into a Trump Account is too good to pass up. The claiming step and the $1,000 election cost you nothing either way. The real planning question only begins with the dollars you add after that.
Key Insight: Claiming the account is free, the $1,000 election is free, and neither one commits you to contributing a dime. Separate the claiming decision from the funding decision, and the first one becomes easy. Do it. The second one deserves an actual plan, sitting next to your 529, your own retirement savings, and your giving.
There's a stewardship angle to this that I care about more than the tax mechanics. Most of our kids will not remember a world where this account didn't exist. That makes it the single earliest opportunity most families will ever have to teach a child that money can be managed on purpose, because the account is literally theirs, it's small, and it grows slowly enough to watch.
Jesus wasn't talking about custodial retirement accounts, but the principle lands squarely on one. A thousand dollars and a few birthday contributions won't fund anyone's retirement, and that was never the point. The point is a child who turns 18 already knowing what an index fund is, already having watched a balance ride through a bad year without anyone panicking, and already understanding that the account was claimed, funded, and tended by people who loved them. Faithful in a very little is the whole curriculum, and this account is about as little as it gets.
Five Moves for Parents and Grandparents Before Year-End:
1. Claim and activate each child's account through the Trump Accounts app, the official website, or your IRS Online Account, making sure names, Social Security numbers, and birth dates match Social Security records.
2. If your child was born in 2025 or later, make the $1,000 pilot election (Form 4547) while you're in there.
3. If you received IRS Notice CP318, follow its instructions rather than filing anything else.
4. Decide what, if anything, to contribute this year, alongside your 529 conversation rather than instead of it.
5. If you run a business or work for one, ask about the employer contribution, up to $2,500 a year excluded from the employee's income.
At Sound Wealth we sit on both sides of this one, because the same account shows up in a family's plan and in a business owner's benefits conversation, and Sound Tax will be the one reporting it all come filing season. The rules are new, more IRS guidance is still arriving, and the right answer for your family depends on things a blog post can't see.
If you'd like to walk through what this looks like for your kids or your business, we'd be glad to have that conversation. And if you know a new parent or a proud grandparent who has no idea these accounts exist, this is exactly the kind of post worth forwarding.
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Disclosure: This content is for educational purposes only and does not constitute personalized investment, tax, or legal advice. Sound Wealth LLC is a registered investment advisor in the states of New Jersey, Pennsylvania, Illinois, and Texas. Advisory services are only offered in states where Sound Wealth is registered or exempt from registration. Please consult your financial advisor, tax professional, or attorney before making decisions based on this information. Past performance does not guarantee future results. All investing involves risk, including the possible loss of principal.