Millions of Americans will start receiving $1,000 deposits from the federal government this week as Trump Accounts – new savings accounts open to U.S. children – begin accepting contributions.
The accounts, open to all U.S. children under age 18 who have a valid Social Security number, were announced in January. The federal government pledged $1,000 seed money for accounts of children born between Jan. 1, 2025, and Dec. 31, 2028.
Those deposits officially launched today but since banks are closed due to the July 4 holiday, money will likely begin flowing on Monday, July 6. The deposits are expected to span several weeks.
Accounts can also be set up for older children but they aren’t eligible for seed money.
The tax-deferred accounts, opened and managed by parents or legal guardians, are designed to grow with investment earnings over time and, when a child becomes an adult, will generally function like a traditional IRA.
You must have an account to receive the seed money. You can set up your account by filing Form 4547 with the IRS with your taxes or at any time during the year. You can get more information on that here.
Parents and others can contribute up to $5,000 per year into the accounts that will be invested in a portfolio of low-cost index funds. If fully funded and left untouched, it could grow to as much as $1.9 million by age 28, the White House projects.
Funds can be accessed without penalty when the child turns 18, as long as they are used for qualified expenses such as education costs, buying a home or starting a business. Withdrawals can be subject to restrictions, however, and would be taxed at ordinary income rates. The funds will transfer to the child’s control when they turn 18.
Where will the money be invested?
Ahead of the federal funding deposits, the U.S. Department of the Treasury, the agency overseeing the accounts, announced the investment lineup. The announcement included the initial funds available at launch. Four other optional low-cost index funds will be added later and can be selected by the account’s administrator.
At launch, all contributions to Trump Accounts will be invested in the State Street SPDR Portfolio S&P 500 ETF, or SPYM, a low-cost exchange-traded fund that tracks the performance of the S&P 500 Index. The fund was selected to provide broad exposure to the U.S. stock market while maintaining expenses well below the statutory fee limitation, Treasury said.
Other ETFs options to be added later include:
- iShares Core S&P 500 ETF (IVV)
- Vanguard Total Stock Market ETF (VTI)
- State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM)
- iShares Core S&P total U.S. Stock Market ETF (ITOT)
More options and investment details will be announced in the coming months.
