“TRUMP ACCOUNT” WAS created as part of the OBBBA signed on July 4, 2025. But is this account anything special? And how could we use it strategically to build wealth? There’s been a lot of confusion about how it works, who qualifies, and whether they’re actually useful. I’ll walk through the rules, highlight key opportunities, and give my take on when (if ever) this account makes sense. First and foremost, I want to point out that no contributions are allowed before 12 months after the date of the enactment of the OBBBA, meaning that you can't really use or invest in such an account before July 5, 2026. General Treatment A Trump Account is treated similarly to a traditional IRA under Section 408(a) (which is not Roth), with certain modifications. This account is created or organized for the exclusive benefit of an eligible individual who hasn't reached age 18 before the end of the calendar year. When such an account is created, it must be designated as the "Trump account." So, who is an eligible individual?

1. A person who has not attained the age of 18 before the close of the calendar year 
2. For whom a Social Security number is issued 
3. For whom an election is made by the Secretary (if they determine such an individual meets the requirements of #1 and #2) OR an election is made by a person other than the Secretary for the establishment of a Trump account. "Secretary" essentially means the IRS.

I believe #3 likely means that you can file some statement with the IRS that establishes such an account (perhaps as part of your tax return filing, or otherwise). Contributions First, no deduction is allowed for any contributions made before the first day of the calendar year in which the beneficiary turns 18. Contributions made before the calendar year in which the beneficiary turns 18 should not be more than $5,000, with inflation adjustments starting in 2027 (using the cost-of-living formula). It is important to note that this is called a "regular" (non-exempt) contribution. That will become important later on. There are other ways that contributions could be made. The following three options are called "exempt" contributions: 1. IRC Section 129 - Employer Contributions Employers can contribute up to $2,500 per employee (or dependent) annually to a Trump Account, excluded from the employee's gross income. $2,500 is increased with cost-of-living adjustment after 2027. The program must meet requirements similar to dependent care assistance (Section 129(d)), such as non-discrimination and notification. 2. IRC Section 6434 - Pilot Program Parents/guardians elect for an "eligible child" (U.S. citizen born Jan. 1, 2025, through Dec. 31, 2028, qualifying dependent under Section 152(c), no prior election was made) to receive $1,000 as a tax payment, refunded directly to the child's Trump account. The election requires the child's Social Security number. Payments are exempt from offsets/levies. 3. Qualified General Contributions Contributions from governments or 501(c)(3) nonprofits are excluded from the beneficiary's gross income. These must target a "qualified class" of beneficiaries, such as all under 18s, those in specific states/geographic areas, or birth-year cohorts. Essentially, this means philanthropic funding (e.g., a charity or governments donating to minors in some geographic area). So, why is there a difference between exempt vs. non-exempt? Distributions For purposes of distributions, we have to discuss the "investment in the contract," or basis. The investment in the contract does not include the exempt types of contributions. This likely means we need to be aware of or track two things:

• Basis of regular contributions (by parents, etc.) 
• Basis of exempt contributions (pilot program, etc) which will become part of earnings

Note that trustees must report contributions (> $25 from non-Secretary sources), distributions, fair market value, and basis to the IRS and beneficiary until age 17. Generally, no distributions are allowed before age 18 unless it’s an exception (rollover, qualified ABLE rollover, distribution of excess contributions. If a beneficiary passes away, the account ceases to be a Trump Account. The fair market value (minus the basis, as described above) is includible in the acquirer's or estate's income. Also, while the account beneficiary is under age 18, contributions to a Trump account do not count against the normal IRA contribution limits (like the $7,000 cap in 2025). Investments The account also must be invested in an "eligible investment" which is defined as a mutual fund or ETF that:

• Tracks a qualified index (like the S&P 500 or another broad U.S. equity index with regulated futures trading) 
• Does not use leverage 
• Has an expense ratio of 0.10% or less 
• Meets any additional criteria set by the Secretary 

So, What Do We Do After Age 18? That's the question most people want to know, and one I’ve thought a lot about. Distributions after 18 are taxed under IRC Section 72. This means that distributions are typically treated as ordinary income to the extent they exceed the "investment in the contract" (basis). Generally, a distribution (or a conversion to a Roth IRA) will likely be applied pro-rata between the basis and earnings. This is because some of the amounts are contributed after-tax (regular contributions) and some are pre-tax (like earnings) Example: Let’s say you contributed $5,000 to a Trump account. Your child also received $1,000 of pilot program contribution. Your child is now 18. The amount grew to $22,000. Basis = $5,000 Earnings = $17,000 If we distribute the entire amount before age 59½, a 10% early withdrawal penalty will apply. Of course, there are some exceptions like:

1. Qualified higher education expenses 
2. First-time homebuyer (up to $10,000) 
3. Series of substantially equal periodic payments (72t) 

Let’s say we distribute the entire amount ($22,000) and pay for higher education. The $17,000 will be taxed at ordinary income rates. If we distribute a portion of the account, say $10,000, the distribution will contain a pro-rata share of both, or around ~$2,272 of basis and $7,727 of earnings. Interestingly, Section 408(d)(2) will be applied "separately with respect to Trump Accounts and other individual retirement plans." This means the Trump account's basis and value are not aggregated with any other traditional IRAs you might have for pro-rata calculations. Conversion to Roth IRA First, more guidance will be needed to clarify how Trump accounts will interact Roth IRAs, and whether a conversion is possible, but the big benefit I personally see with something like this is being likely able to convert to a Roth IRA and have a substantial amount without the need for earned income (assuming it's allowed) This way, a child could have 40+ years of growth all tax-free assuming such a conversion will be allowed. The main question is how it would be taxed. We cannot move only the after-tax dollars from a Trump account to a Roth IRA and keep the rest in a Traditional IRA, since partial distributions must be allocated pro-rata. If we convert the entire $22,000 to a Roth IRA, $17,000 will be taxed. If we convert $10,000, a pro-rata share will be taxed, similarly to the example above. This means that if you have a dependent child, and convert some amounts, the kiddie tax will likely apply if you convert above certain thresholds (i.e., standard deduction for a dependent child). Of course, the IRS has a lot of work to do on clarifying all these details, and this is just my interpretation based on the text and by no means should be construed as financial or tax advice. Benefits and Prioritization Is this worth it? I believe the only usefulness of such an account is the Roth IRA play, and I expect wealthier taxpayers will likely take advantage of it if allowed. I would certainly at least get the $1,000 pilot credit if qualified. For someone who can allocate $300 a month to build a child's wealth, I think a 529 plan will likely come out ahead. Especially with the $35,000 Roth IRA rollover option in case a child doesn't attend a higher education institution. This is because the withdrawals are tax-free for qualified higher education expenses, and you can get a state tax deduction (+ opportunity cost there). Also, OBBBA extended the definition of many expenses for 529 plans, like paying for SAT/AP exams or postsecondary credentials. One thing I think is important to keep in mind with Trump accounts is liquidity. If distributions from a Trump account are taxable, and the 10% penalty can be avoided in a limited set of circumstances, how likely is the usefulness of such an account for a 22-to-30 year old? This means that if you wanted to support your child with a down payment for a car or a house (beyond the $10,000 amount exception to the 10% penalty), I believe a better savings vehicle might be more appropriate. Trump Account vs. UTMA Taking aside the 529 plan, as I believe it's superior for most families, let’s look at UTMA vs Trump account. Both UTMA and Trump accounts are after-tax. UTMA could have some dividends taxed, but due to the standard deduction, and likely qualified nature of them, ~$2,700 of such income can be excluded (standard deduction of $1,350, the next $1,350 is taxed at the child's rate) per year. So UTMA (taxable) vs Trump account (tax-deferred) will likely have similar tax drag in reality, unless your child has substantial assets in the UTMA. Liquidity Let’s say your child needs to buy a car at age 25, which they could use either UTMA vs Trump account for the down payment. Let’s assume we invested $5,000 into each at their birth. By the time they are 25, let’s say they have $34,000. For simplicity, assume no state taxes. With a UTMA account, parents could actually strategically do tax gain harvesting every single year to harvest long-term capital gains. They've increased the basis to ~$15,000. Once withdrawals are allowed at 18, Trump accounts could also start getting converted into Roth. To stay below the kiddie tax, we can only harvest $1,350 (plus COL adjustment). The conversion could start a 5-year clock for withdrawing the taxable portion of the conversion. At 25, we would only have very little to use with the Trump account that is accessible penalty-free. Something to think about, though, is that UTMA money counts toward a child's assets, whereas IRAs don't for FAFSA. A good approach, in my opinion, could be to have a small allocation to such an account solely for the purposes of Roth funding, while the majority of assets are prioritized in 529 and UTMA/brokerage in parents' names if possible. Summary

• A Trump account is an after-tax account (no tax deduction applies to contributions).
• Parents or relatives can contribute up to $5,000 to the account
• No withdrawals are allowed before the beneficiary turns 18.
• Investment earnings grow tax-deferred (e.g dividends aren’t taxed)
• At 18, the account becomes a traditional IRA, with ordinary income tax rates applied to withdrawals to the extent they exceed the basis in the account (contributions). The 10% penalty will also apply to withdrawals before age 59½ unless an exception applies ($10,000 for a down payment, education, 72(t) SoSEPP, etc.).
• A $1,000 tax credit could be applied to a Trump account if your qualifying child is born between Jan 1, 2025, and Dec 31, 2028.

Is it really worth the hassle? Personally, I would at least get the $1,000 credit if your child qualifies, as it shouldn’t be too much effort to get it. It's still unclear who will administer the accounts, and likely all major “players” will be involved to some extent. For most families, I'd likely prioritize 529 plans and UTMA/brokerage accounts first, but using a small allocation to a Trump Account could give a child a potential head start on tax-free growth at 18. But like with any new provision, there are details the IRS will need to clarify, and the above is just my interpretation of the current law. Bogdan Sheremeta is a licensed CPA based in Illinois with experience at Deloitte and a Fortune 200 multinational. He shares insights on taxes and personal finance through his newsletter, helping thousands of readers to make smarter financial decisions. He has over 140,000 followers on X and 110,000 on Instagram.

ANDREW CARNEGIE USED to say that competitors were welcome to tour his factory, to see his production line up close. Why? Because of Carnegie Steel’s massive scale and complex operations, he was confident no one would ever be able to replicate what he’d built. Hedge fund manager Seth Klarman is a modern-day Carnegie. Klarman founded the Boston-based Baupost Group in 1982, and while performance numbers aren’t publicly available, the firm’s track record is believed to be among the best in the industry. By some accounts, returns have averaged 20% per year, roughly double the overall market’s returns. Like Carnegie, Klarman’s approach is so specialized and so unique that he’s happy to tell people how he does it. He regularly gives interviews and even wrote a book detailing the different ways Baupost makes money.  While this approach isn’t appropriate for everyday investors, these strategies—known as deep-value—are so different from what’s popular on Wall Street that they’re worth understanding. Klarman’s philosophy rests on several key pillars, the first of which is that he avoids making forecasts. He jokes that he’d “predict ten of the next two recessions,” and as a result, doesn’t find that a useful basis for making investments. This is a particularly important point because active management often involves forecasting. Klarman’s view, though, is that it’s too unreliable and thus the wrong approach. Other successful investors share this view. Peter Lynch, the retired manager of Fidelity’s Magellan Fund, called forecasting “futile” and argued that “crystal ball stuff doesn't work.” Lynch was especially wary of economic forecasts. “If you spend 13 minutes a year on economics, you've wasted 10 minutes,” he once commented. Instead, Lynch would go company by company, looking for stocks that, in his estimation, were selling for less than they were worth. Warren Buffett has expressed largely the same view. “What you really want to do in investments is figure out what is important and knowable,” he’s said. And while the future direction of the economy is important, it isn’t knowable. For that reason, Buffett says, investors should avoid making forecasts and should avoid listening to others’ predictions. If forecasting isn’t part of the value investors’ toolkit, then how do they choose investments? In short, they search for things selling at such steep discounts that a crystal ball isn’t necessary. But because these sorts of opportunities are rare, they’re often looking far off the beaten path. Obvious investments—even if they look like good investments—don’t appeal to value investors. Baupost doesn’t own Apple, Amazon or Microsoft. This approach, in other words, is the opposite of what Wall Street tends to promote. To illustrate how Baupost operates, Klarman describes an early investment. When he was a teenager, he worked out an arrangement with a local bus driver to secure rare coins. At the end of each day, the driver would go through the bus’s coin box, and when he found an out-of-circulation coin like a Mercury dime, the driver would give it to Klarman in exchange for a regular coin. In other words, Klarman would pay 10 cents for something worth far more than 10 cents somewhere else. In finance, this is known as arbitrage, and it’s among the strategies that hedge funds like Baupost use.  In his book, Margin of Safety, Klarman describes some of the other unusual investments favored by value managers. These include corporate spinoffs, bankruptcies, thrift bank conversions, rights offerings and other complex securities.  If these sound complicated, that’s the idea. These investments tend to be profitable because they’re so arcane. Consider spinoffs. Why do they present opportunity? Margin of Safety explains that individual shareholders receiving spun-off shares will often sell reflexively because “they may know little or nothing about the business,” and institutional investors “may deem the newly created entity too small to bother with.” For these reasons, newly spun off shares tend to trade at depressed prices, providing opportunity for value investors willing to go against the grain. In one sense, the types of investments Klarman pursues are straightforward. Value investors like to say that they’re simply looking to buy a dollar for 50 cents. It’s really no more complicated than that. Hedge fund manager Joel Greenblatt ran a firm called Gotham Capital that pursued many of the same strategies as Baupost, and with similar results. Over one 10-year period, Gotham averaged 50% annual returns, a remarkable feat. And just like Klarman, Greenblatt wrote a book detailing exactly how he did it. It’s called You Can Be a Stock Market Genius. What’s telling, however, is how few people choose to follow their lead. That’s because deep-value investing like this requires more than just a playbook; it requires a commitment of time and patience, it involves significant legwork, and perhaps most important, it requires the mental fortitude to intentionally go against the crowd. What can individual investors learn from these strategies? Just as with Carnegie’s steel mill, funds like Baupost and Gotham are a marvel. Their complexity, though, tells us something important: It illustrates just how difficult it is to beat the market. This type of investing entails significant effort and enormous cost. To run his fund, Klarman employs 250 analysts. To reliably beat the market, that’s what’s required. And even then, it doesn’t always work. According to the data, the majority of actively-managed funds underperform each year. Recent reports indicate that even Baupost has been struggling of late. That’s why, at the risk of sounding like a broken record, I always recommend index funds. To be sure, they aren’t designed to beat the market. But by avoiding counterproductive strategies like forecasting and tactical trading, index funds are designed to do something else critically important: They’re designed to help investors avoid underperforming. Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles. [xyz-ihs snippet="Donate"]