What Are Trump Accounts and Do They Belong in Your Family's Plan?

Trump Accounts, created under the One Big Beautiful Bill Act and officially known as 530A accounts, are a brand-new type of custodial IRA for children. They are owned by the child but administered by an adult, and they become available for contributions starting July 4, 2026. To be eligible, a child must not yet have turned 18 by the end of the year the account is opened. Each child can have only one.

The headline feature is a one-time $1,000 deposit from the federal government for children born between January 1, 2025, and December 31, 2028. If your child or grandchild falls in that window, claiming this seed money is close to a no-brainer; it is free, long-term capital that starts compounding from day one.  Additionally, children born between 2016 and 2024 may be eligible for a $250 charitable deposit from The Dell Foundation.  To qualify, the child must live in a ZIP code with a median household income of $150,000 or less.  Most of eastern Idaho is below this threshold and would qualify for the contribution.

Beyond the seed money, family members, individuals, employers, and charitable or government entities can all contribute. Individual and employer contributions combined are capped at $5,000 per child per year (indexed for inflation after 2027), and employer contributions specifically are capped at $2,500 of that total. Contributions from charities and government entities do not count against this limit. There is no earned income requirement, which is what truly separates this account from a custodial IRA — a six-month-old with no income of their own can be the beneficiary of a fully funded Trump Account, something that has never been possible with a traditional retirement account before.

During the "growth period" — birth through December 31 of the year before the child turns 18 — funds must be invested in low-cost index mutual funds or ETFs tracking a broad U.S. stock index, with fees capped at 0.10%. No withdrawals are permitted during this period, with no exceptions. Once the child turns 18, the account converts into a traditional IRA and is governed by the same rules as any other IRA: withdrawals before age 59½ are generally subject to ordinary income tax plus a 10% penalty, with the usual list of exceptions (first home purchase, higher education, and so on).

If you have grandkids or young children, you have likely already considered a 529 plan, and possibly a custodial UTMA/UGMA account. Here is the short version of how Trump Accounts stack up: 529 plans remain the better choice if college is the primary goal.

Contributions grow tax-deferred, and withdrawals for qualified education expenses are entirely tax-free. 529 plans also allow far larger contributions than the $5,000 annual cap on Trump Accounts.

Custodial UTMA accounts remain the more flexible option if you are not sure how the money will eventually be used and would like to keep options open for non-college and non-retirement expenses like weddings, house down payments, vehicles, etc. There is no cap on contributions, and the funds can be spent on anything that benefits the child, not just education or retirement.

The tradeoff is that any growth is taxed annually under the "kiddie tax" rules, and the child gains full, unrestricted control of the account at the age of majority.

Trump Accounts occupy a real, if narrower, lane: a no-strings-attached way to begin tax-deferred retirement savings for a child from the day they are born, without needing them to have a job first. They are best thought of as a complement to a 529 plan rather than a replacement for one.

The detail I find most interesting is what happens the year your child turns 18. At that point, the Trump Account simply becomes a traditional IRA in their name. If, in that same year, they have little or no other taxable income — which describes most 18-year-olds — there is a real opportunity to convert some or all of the account into a Roth IRA at a very low tax cost. Converting at age 18, when a child might be in the 10% or 12% bracket, locks in decades of future tax-free growth on whatever has accumulated, which by then could be a meaningful sum if the account has been funded since birth.  Family contributions to Trump accounts are considered basis and not taxable in the event of a Roth Conversion; only gains are taxable in the conversion.

As an illustration: a child who receives the $1,000 government seed money and then receives the maximum $5,000 annual contribution every year through age 17, assuming a 7% average annual return, would have an account worth somewhere in the neighborhood of $170,000 by their 18th birthday. Converting that balance to a Roth IRA in a year with little other income could mean decades more of entirely tax-free compounding, simply by being deliberate about the timing. The $85,000 in family contributions (17 years x $5,000) would not be taxable; only the roughly $85,000 in gains would be.  If the funds stay invested in a Roth IRA after the conversion to age 65, with no future contributions, the account could grow to over $4 million; all tax-free because of a one-time tax payment made at age 18.

My overall take: if your grandchild or child is eligible for the $1,000 seed deposit, claiming it is an easy decision — it is free money that starts compounding decades before most people start saving for retirement. Beyond that initial deposit, whether to make ongoing contributions depends on your family's broader goals. If you are saving for college, the 529 is still the best option. If you want flexibility in withdrawals, custodial accounts are probably the best option.  However, if you would like to jump-start your child/grandchild’s retirement plan before they have wages and are eligible to contribute to an IRA, the Trump account is a great new tool to consider.