Trump Accounts for children bring ETF choice as advisers urge broader saving

Trump Accounts for children have quickly become a new investing question for parents, with more than seven million children signed up, CNBC reported. The accounts can help start retirement savings early, but financial advisers told CNBC that families should treat them as one tool, not the whole plan.

The accounts are tax-deferred, meaning taxes are generally delayed until money is withdrawn. Families, friends and employers can contribute up to $5,000 a year for a child under 18, and the U.S. Treasury is providing a one-time $1,000 seed contribution for children born from 2025 through 2028, according to CNBC.

What are Trump Accounts for children?

Trump Accounts are investment accounts designed to keep money in the market for a long period, with retirement as the main goal. CNBC reported that withdrawals after the child turns 18 and before age 59½ are generally subject to income taxes and a 10% penalty, although higher education expenses are among the penalty exceptions.

Robert Raimondo, co-founder and chief development officer at Brookwood Investment Group in Phoenix, told CNBC the accounts are best viewed as “a complement” to other planning families are doing, or should consider doing, for children.

ETF choices are set to expand

For now, Trump Account contributions are going into the State Street SPDR Portfolio S&P 500 ETF, ticker SPYM, as the default fund. An ETF lets investors buy a basket of investments through a single traded fund, which can make broad market exposure easier to access.

The Treasury Department said in a press release that four more U.S. stock ETFs will be added in the coming months. It said it will announce when account holders can change investment allocations and provide instructions at that time. A Treasury spokesperson declined CNBC’s request for more specific timing.

The coming choices include iShares Core S&P 500 ETF, ticker IVV, which also tracks the S&P 500 and carries a 0.03% expense ratio, compared with 0.02% for SPYM, according to CNBC. Three other options cover wider parts of the U.S. stock market: Vanguard Morningstar Total Stock Market ETF, ticker VTI, with more than 3,500 holdings and a 0.03% expense ratio; SPDR Portfolio S&P 1500 Composite Stock Market ETF, ticker SPTM, with about 1,500 stocks, about 90% of the investable U.S. equity market and a 0.03% expense ratio; and iShares Core S&P Total U.S. Stock Market ETF, ticker ITOT, with more than 2,400 holdings and a 0.03% expense ratio.

How much does the fund choice matter?

Some advisers told CNBC the broader total-market funds may appeal to families worried about the S&P 500 being concentrated in a smaller group of large companies after strong market gains. Marissa Beyer, partner and senior wealth adviser at Fidato Wealth in Middleburg Heights, Ohio, told CNBC she would consider VTI once available because it spreads exposure across more companies and adds more small- and mid-size stocks than an S&P 500 fund.

Other advisers may stay with the default. Jaymon Meikle, a senior wealth adviser on the Gertsema Wealth team in St. Joseph, Missouri, told CNBC he opened a Trump Account for his daughter and plans to keep the core S&P 500 fund while using other investments for diversification.

Raimondo told CNBC that because the available funds are broadly similar, investor behavior and contribution levels may matter more than picking the single best fund. Beyer told CNBC that for very young children with decades before retirement, an all-stock allocation can make sense because the account is not meant to be liquid for many years.

Other accounts families may weigh

CNBC reported that families with more money to set aside can also consider other vehicles, while keeping gifting limits in mind. For 2026, CNBC reported those limits are $19,000 for singles and $38,000 for married couples before tax consequences may apply.

• 529 college savings plans are state-sponsored, tax-advantaged accounts for qualified education expenses. CNBC reported that their investment options often become more conservative as the expected spending date gets closer.

• Taxable brokerage accounts offer flexibility because parents keep control and can use the money for college, a home down payment, a car or another purpose, though CNBC noted they do not carry the same tax advantages.

• UGMA and UTMA custodial accounts have no contribution limits and no early withdrawal penalties, according to CNBC. Raimondo told CNBC parents may want to be careful about how much they put in because the assets belong to the child at the age of majority, often 18 or 21 depending on the state.

CNBC reported that custodial accounts also have tax rules for unearned income: the first $1,350 is tax-free, the next $1,350 is taxed at the child’s marginal rate, and income above $2,700 is taxed at the parent’s marginal rate.

Josh Radman, founder of Presidio Advisors in Denver, told CNBC he favors low-cost, tax-efficient ETFs and includes international exposure rather than trying to pick the winning sector. He said parents should look at all household investments together, since one account may be concentrated while the broader family portfolio is more diversified.

This story draws on original reporting from CNBC.