There’s been a surge of articles lately regarding the new 530A accounts, or more commonly called “Trump” accounts, because the Treasury Dept issued further guidance on how this new account type should function. These were proposals instead of final rules, so details can change before the accounts are available this summer. In the meantime, read on for a summary of some of the more important details as we know them today.
First, and as you may recall, Trump accounts were created within the One Big Beautiful Bill Act signed into law last summer. Aimed at “jumpstarting the American Dream”, these accounts are meant to be a new twist on long-term savings vehicles for kids aged 18 and younger.
Trump accounts are sort of a hybrid of traditional IRAs and 529 plans and are governed by special rules, such as no distributions allowed during the “growth period” of the account. That period begins at funding and lasts until the account beneficiary (the child) is 18. In theory, initial cash deposits plus contributions over the years from a variety of sources will grow along with the US stock market over time because that’s where the money must be invested.
Reports suggest around 73 million kids could benefit from Trump accounts. A sizeable portion of those kids could also benefit from a pilot program trying to seed American children born from 2025 through 2028 with $1,000 to start saving for retirement. The timing of this is meant to coincide with our 250th birthday this July 4th, although the rollout and impact of these accounts will likely take months, if not years to play out.
To be eligible for the $1,000 pilot program, kids need to have been born between January 1, 2025, and December 31, 2028, and have a Social Security number. But again, Trump accounts are also available for kids younger than 18, just not the upfront cash.
To open the account, “authorized individuals”, defined as a legal guardian, parent, adult sibling or grandparent (in that order) file IRS Form 4547 with their tax return or open an account electronically through the www.trumpaccounts.gov website. There is no automatic enrollment, at least not currently.
The upfront money and subsequent contributions belong to the beneficiary but the authorized individual controls the account until the beneficiary turns 18.
The idea is that the initial $1,000 comes from the government but then pretty much anyone, from family members to employers, can collectively make non-deductible contributions up to a combined total of $5,000 per year (potentially indexed to inflation). Then the authorized individual invests this money in US stocks on behalf of the child. Given long enough, at least to age 59.5, that can establish a retirement nest egg where contributions won’t be taxed on distribution, but gains would be taxed as ordinary income in the year withdrawn, perhaps spread over many years as with a typical retirement account. Early distributions after age 18 would be penalized unless used for qualified expenses, such as education or buying a first home.
Apparently, the initial accounts participating in the $1,000 pilot program can only be opened by the Treasury Dept at the election of the authorized individual, again via the form or website mentioned above. And there can be only one account per beneficiary at a time. I’ve read that BNY Mellon will be the entity opening these accounts and receiving the money directly from the government, but this could change.
Once opened and funded by the Treasury, the account can presumably stay with BNY Mellon or be transferred to a different brokerage firm, such as Schwab or likely any other brokerage firm you’re familiar with. This new account would replace the original account. It’s unclear if the account opening process will be different for an older eligible child, meaning you could skip the Treasury/BNY Mellon step, but future guidance should clarify that issue as well.
Ultimately, Trump accounts are a good deal for families with newborns or very young kids because it’s free money. Beyond that, these accounts can also work considering they’re sort of an amalgamation of different account types, allowing even the youngest kids (or adults on their behalf, you know what I mean…) to start saving for retirement.
Otherwise, remember that there are at least three other account types that might meet your needs better (while admittedly lacking the free money) and could work alongside, or in place of, Trump accounts…
529 plans – These accounts are geared toward education savings. Much larger contributions can be made to 529s per year than to Trump accounts, and you have the flexibility to change the beneficiary to your other kids, or even to yourself if your first beneficiary doesn’t use all of it. Money comes out tax free if used for qualified expenses. The OBBBA also created a mechanism to transition unused 529 plan money into a Roth IRA, so there are options.
Uniform Transfer to Minor Accounts (UTMAs) – These are brokerage accounts with less special tax treatment, but the money can be used for anything at any time. Anyone can contribute cash or stock shares, for example, to a UTMA. The money is the property of the minor while the account is controlled by their guardian (until as late as age 25 in CA), usually the parent or grandparent. Kids get preferential tax treatment (known as the Kiddie Tax) on up to $2,700 of interest, dividends, and capital gains, so these accounts can be structured to be very lean when it comes to taxes. Investments could be sold later and the (now adult) child would pay their own taxes at that time.
Roth IRA – If your child has taxable income, perhaps on their own or through your business, you could open and fund a Roth IRA on their behalf. Money goes in as non-deductible contributions and then, ideally, grows tax-deferred for decades and comes out after age 59.5 with no tax owed on what could be substantial gains. Most kids don’t have an income and are precluded from making traditional or Roth IRA contributions, so this is one of the gaps being addressed by Trump accounts. Still, if you’re thinking “retirement savings”, getting your kids started with a Roth IRA is probably the best way, if possible.
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