‘Trump accounts’ can come with free money. Your questions answered

Earlier this week, the White House — in conjunction with Michael Dell, founder and CEO of Dell Technologies, and his wife, Susan — announced one of the largest donations ever to benefit American children.

The Dells’ $6.25 billion pledge goes hand in hand with a new federal government program focused on early wealth building. The money will go into a new child savings account for children under 18.

Those who qualify can receive a $250 grant from the Dells’ commitment or a one-time $1,000 initial deposit from the government to seed the so-called Trump accounts. 

Here’s what families need to know about how the program works:

Trump accounts, a type of tax-advantaged savings and investment account, were created under President Donald Trump’s “big beautiful bill,” which Congress passed in July.

The accounts function like an individual retirement account, with some exceptions. These accounts can receive contributions from multiple sources, such as family or employers, and the funds grow tax-deferred.

Trump accounts are not yet available; however, families who want to open a Trump account can start that process now.

Any authorized individual — a legal guardian, parent, adult sibling or grandparent — can open a Trump account on behalf of a child age 18 or younger, as long as the child is a U.S. citizen.

To open the account, an election must be made on IRS Form 4547, named after Trump’s presidential terms. The form can be filed separately or with your 2025 tax return. Starting in mid-2026, you can also make the election online at trumpaccounts.gov.

After filing the form, the Treasury Department will confirm that the account has been opened with an “authentication process,” according to a White House document. That fact sheet does not specify what the process will entail.

Initially, Trump accounts will be held with the Treasury’s “designated financial agent,” with the opportunity to transfer the full balance to your preferred brokerage firm at a later date, the Treasury said this week.

Once an account is established, eligible children may receive either the one-time $1,000 contribution from the Department of the Treasury, or the $250 Dell family grant, deposited to their Trump account.

Parents of babies born in 2025 through 2028 can elect to receive the $1,000, known as the “pilot program contribution,” on Form 4547. There are no income requirements, and everyone is eligible for the government’s seed money.

Although Form 4547 can be filed at any time, no pilot program contribution will be deposited in the Trump account of a child earlier than July 4, 2026, according to the IRS.

Children 10 or under and born before Jan. 1, 2025 — who wouldn’t qualify for the $1,000 initial deposit from the Treasury — could get a $250 contribution if they live in a ZIP code where the median income is $150,000 or less.

That money is aimed toward lower-income families based on their ZIP code, and there is no additional form required for the Dell contribution.

Children older than 10 may benefit, too, if funds remain available after initial sign-ups, according to a fact sheet from the Dell Foundation.

CNBC analyzed U.S. Census Bureau data for median incomes and population ages for each U.S. ZIP code. Only about 3% of ZIP codes have median incomes above $150,000.

As of July 4, 2026, parents, guardians, grandparents and others will be able to contribute up to $5,000 a year in after-tax dollars up until the year before the beneficiary turns 18. The annual contribution limit indexes for inflation after 2027.

Employers can also contribute up to $2,500 per worker, per year, which is part of the $5,000 limit and won’t count as taxable income, according to the IRS. This figure also adjusts for inflation after 2027.

Additionally, qualifying charitable organizations and state and local governments may make contributions that do not count toward the $5,000 limit.

Trump account investments are restricted to “broad U.S. equity index funds,” according to the Treasury, such as mutual or exchange-traded funds. These assets:

must track a “qualified index”can’t use leverage, which typically uses debt or borrowing to boost returnscan’t exceed annual fees or expenses above 0.1%

While the definition of “qualified index” remains unclear, these criteria could include about 186 mutual funds and ETFs, according to data from Morningstar Direct.

Experts say the one-time $250 or $1,000 grant won’t grow substantially over the first 18 years without additional contributions.

For example, $1,000 funded at birth could be worth around $4,700 by age 18, assuming a 9% annual return, and without considering inflation, according to chartered financial analyst Jason Norris. 

“If the same family is able to contribute $50 per month, the account value at age 18 could potentially grow to greater than $29,000,” said Norris, who is director of equity research and portfolio management of Ferguson Wellman Capital Management in Portland, Oregon, which ranked No. 12 on CNBC’s Financial Advisor 100 list for 2025.

“That is a meaningful difference over that period of time,” he said.

The goal is to “create a broad-based stakeholder economy,” said Jason Ewas, associate director at the Aspen Institute Financial Security Program, a nonprofit forum. “Half of the population doesn’t own stocks,” he said.

When it comes to wealth-building opportunities, particularly by investing in the stock market, “this is a way to make a statement about getting a foot in the door,” Ewas said.

Many families continually miss out on stock market gains while wealth rises fastest for those at the very top, data from the Federal Reserve also shows, as the value of their investment holdings continues to grow. The top 10% of Americans hold over 87% of corporate equities and mutual fund shares.

Generally, it’s not possible to withdraw Trump account funds before age 18. But there are limited exceptions, including certain rollovers, distribution upon death and for excess contributions, according to the IRS.

You may roll over the entire account to another brokerage, known as a trustee-to-trustee transfer. Certain rollovers to Achieving a Better Life Experience, or ABLE, accounts, for individuals with disabilities, may also be permitted during the year the child turns 17.

Once the child reaches age 18, the standard rules for traditional IRAs apply. Withdrawals before age 59½ are generally subject to income taxes and a 10% penalty. There are certain penalty exceptions, such as for distributions for higher education expenses or first home purchases.

Trump accounts are like other savings account options that already exist, including 529 college savings plans, which have higher contribution limits.

In fact, there are at least 11 alternative tax-advantaged savings vehicles, each with different rules, limitations and regulations, according to the Tax Foundation. Some, like a Roth IRA, are geared towards retirement, while others, like a 529 plan, are aimed at education expenses.

Some financial advisors say that the Trump accounts may not offer the best tax incentives. But with every case, the bulk of Americans who can take advantage of these accounts are high-income households, experts also say, because they can afford to make the maximum annual contributions.  

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