TRUMP ACCOUNTS

Trump Accounts are now official – here’s how they work, the pros and cons, and who is eligible for a $1,000 contribution

The One Big Beautiful Bill Act, passed in July 2025, created Section 530A accounts, more commonly known as Trump accounts. The first accounts will be eligible for contributions this summer, so here’s everything you need to know.

Participation: Starting this tax season, a new 530A account can be opened by filling out (the aptly-named) Form 4547 and filing it with your 2025 tax return. An online version of the same form will be more widely available this summer here. A beneficiary of one of these accounts must have been born after January 1, 2025, or be under age 18 by December 31, 2026. They also must be a US citizen with a Social Security number.

Contributions: Parents of babies born 2025-2028 can elect to receive $1,000 in seed money from a government-sponsored pilot program. Additional contributions, up to $5,000 a year, can be made by parents (after-tax), employers (pre-tax), or other entities (like those from the Dell family, to account holders in certain zip codes, which will also be pre-tax), until the child turns 18.

Investments: All accounts will be invested in a low-cost index funds that track the S&P 500.

Ownership: The accounts belong to the guardian (like a parent) until the child turns 18, at which point the account will transition to being owned by the child. 

Withdrawals: Funds cannot be withdrawn until the account holders reach age 18. When withdrawn, the constraints are similar to those of a traditional IRA: withdrawals, expected to be largely made up of pre-tax funds (primarily the growth on any investments), will be taxed. There will be a 10% penalty unless the account holder waits until after age 59 ½, or uses the funds to pay for higher education or for a first-time home purchase (however, taxes still apply in these cases).

Our assessment: For families with children born between 2025-2028, opening an account to claim a free $1,000 is an obvious benefit. And jump-starting a long-term saving and investing program is never a bad idea (“early and often” is one of our favorite saving and investing mantras). However:

If the goal is to help a child save for retirement: Many consumers (and their financial planners) already struggle with ameliorating the tax burden caused by withdrawals in retirement from existing pre-tax accounts (like traditional IRAs and 401(k) plans). This is why, in recent years, there has been a dramatic uptick in conversations about tax-planning strategies like Roth conversions, reducing contributions to pre-tax accounts in favor of post-tax Roth contributions instead, and drawing down traditional IRAs by making charitable contributions. There are other types of accounts that are more effective retirement-saving vehicles, with higher contribution limits and a lower (or no) eventual tax burden. 

If the goal is to help a child save for college: 529 plans are designed to be funded and used for this purpose. Contributions are sometimes state-tax-deductible and at the moment contributions can be as high as $95,000 in one year. The investments can be controlled. Withdrawals for college are not taxed or penalized. And leftover funds can be rolled into a Roth IRA, also without taxation or penalty.

If the goal is to help a child save for an eventual new car, first home, or other purpose: UTMA/UGMA or regular taxable investment accounts have no contribution limits; can be invested as the family or child chooses; don’t have any restrictions on usage; can be tapped prior to age 59½ without penalty; and the taxation on the sale of investments is generally no more than 15% federally (which is the usually-lower capital gains tax rate, vs the usually-higher ordinary income tax rate).  

Parents of new babies: go ahead and elect the free $1,000 contribution into your child’s new 530A account. But then work with a financial planner to determine the best longer-term strategy to save for your child’s future.