By Naveen Athrappully
The Department of the Treasury and the IRS have issued proposed regulations clarifying which investments may be made by Trump Accounts.
A Trump Account is a savings account designed to help children get a head start on financial wellness. It can be opened in the name of any individual younger than 18 with a valid Social Security number.
Funds in these accounts can only be invested in “eligible investments” during the growth period, referring to the period beginning from setting up the Trump Account to Dec. 31 of the calendar year in which the beneficiary becomes 17 years of age, the IRS said in an Aug. 20 statement. After the growth period, these eligible investment restrictions won’t apply.
An eligible investment is either a mutual fund or an exchange-traded fund (ETF) that tracks the returns of a qualified index, according to the proposed rule notice published by the IRS on Aug. 21 in the Federal Register.
A qualified index means the S&P 500 index or any other index composed of equity investments in mainly U.S. companies and for which regulated futures contracts are traded on an exchange or board of trade.
Indexes that solely focus on specific sectors or industries won’t be deemed a qualified index, the notice clarified. However, indexes based on companies’ market capitalization can qualify.
A mutual fund or ETF must not use leverage in order to qualify as an eligible investment, according to the proposal. They must also not have annual fees and expenses of more than 0.1 percent of the investment balance.
Around 85 million children from 44 million families across the United States are expected to be impacted by the proposed regulations, the notice said.
In its statement, the IRS said that if an account beneficiary does not select an eligible investment offered by the account’s trustee—institutions managing the accounts—then the funds will automatically be invested in eligible investments selected by the trustee during the growth period.
The Treasury and the IRS are seeking comments on the proposed rules, which are due by Oct. 20. The regulations, once in effect, will apply to tax years starting on or after Jan. 1, 2026.
“These proposed regulations will provide clarity for trustees and beneficiaries of Trump Accounts, thus encouraging eligible participants to invest in low-fee mutual funds and ETFs that will grow on a tax-deferred basis potentially over their entire lives,” IRS Chief Executive Officer Frank J. Bisignano said in the statement.
“Funds deposited in Trump Accounts enable American children to start investing now and enjoy years of compound earnings for their future college, retirement and other needs.”
According to estimates on the Trump Account website, $1,000 deposited at the time of a child’s birth could grow to $6,000 by the time the child turns 18, even if no additional contributions are made.
If $250 is contributed annually, the fund could grow to $19,000. Under the maximum $5,000 annual contribution, the fund value could reach $271,000 at age 18.
In early July, the White House said that almost 6 million Trump Accounts had been opened.
In an Aug. 20 statement, the Treasury said the proposed regulations aim to keep investment costs low and help children’s savings grow over the long term.
Investment fees and expenses can reduce account balances over time. The proposed rules limit investments to funds with low expense ratios and avoid those with excessive fees.
“Every dollar in a child’s Trump Account should be working toward that child’s financial future, not diminished by unnecessary fees,” Treasury Secretary Scott Bessent said in the statement.
“Under President Trump’s leadership, Treasury is putting simple, commonsense protections in place to help families keep more of their investment returns.”
In a July 1 statement, the Treasury announced that the State Street SPDR Portfolio S&P 500 ETF would be the default investment for all contributions to Trump Accounts.
Parents or guardians of Trump Accounts can choose to invest funds in four additional low-cost index ETF options—iShares Core S&P 500 ETF, Vanguard Total Stock Market ETF, State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF, and iShares Core S&P Total U.S. Stock Market ETF.
