By Ian Berger, JD
IRA Analyst
One of the most important features of Trump accounts is that they must be invested a certain way during the period before January 1 of the year the child turns age 18. (The IRS calls this the “growth period.”) The IRS recently issued guidance on permissible (“eligible”) investments during the growth period. The guidance came in the form of proposed regulations issued on August 21, 2026.
During the growth period, Trump account funds must be invested in a low-cost mutual fund or ETF that tracks the S&P 500 stock index or another index comprised primarily of U.S. companies. The fund may not use leverage, and annual fees and expenses may not exceed 0.10% (10 basis points) of the net value of the assets.
On July 1, 2026, the Treasury Dept. announced that initial Trump account contributions must be invested in the State Street SPDR Portfolio S&P 500 ETF (Ticker: SPYM). In the coming months, funds can be allocated among four other ETFs.
Here are the highlights of the August 21 proposed regulations:
- ETF share classes of mutual funds qualify as permissible ETFs.
- The mutual fund or ETF must seek to replicate the returns of an index, but it need not necessarily hold each of the underlying stocks of the index.
- An index that is based on market capitalization (e.g., a mid-cap fund) would qualify, but an industry or sector-specific index (e.g., a health care fund) would not. In addition, an environmental, social and governance (ESG) fund index may not be used.
- An index will be treated as comprised of “primarily” U.S. companies if those companies represent at least 90 percent of the index based on their weighting in the index.
- Annual fees and expenses include transactional fees, such as sales charges, loads and redemption fees. They don’t include custodial fees or other similar charges associated with a Trump account itself (rather than any particular investment fund).
- A custodian may offer multiple eligible investments for Trump account funds. In that case, the custodian must select a default eligible investment if no fund is selected.
- Before a custodian first offers an investment fund, it must determine that the fund qualifies as an eligible investment. Thereafter, the custodian must monitor all investment funds at least once every 12 months. If the custodian determines that a fund no longer qualifies, its shares must be sold and reinvested within 30 days.
Most of the rules in the regulations are proposed to be effective retroactively back to January 1, 2026. However, the rules governing custodians won’t apply until after the IRS finalizes the regulations.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
https://irahelp.com/irs-issues-guidance-on-permissible-trump-account-investments/