A Trump Account (formally known as a “530A account”) is a new way to save, designed to help families build wealth for their children from an early age.
How Do They Work?
A Trump Account is a tax-advantaged investment account established for a child (under 18). Until the year in which the child reaches 18, non-deductible contributions can be made by anyone, including employers whose contributions can be excluded from the employee’s taxable income up to $2,500 per year through a qualifying employer program (and count toward the $5,000 annual limit).
The annual limit is $5,000. In addition, eligible children born from 2025–2028 may receive a one-time $1,000 contribution from the federal government to get the account started. For eligible children, this is essentially free money with decades to potentially grow.
The investments are limited to diversified U.S. stock index funds, which helps keep costs low and reduces the temptation to chase the latest hot investment.
The Good News
The biggest advantage is time. A child who starts investing at birth has 18 years before reaching adulthood, and potentially another 40 or 50 years before retirement. That long time horizon creates significant potential for tax-deferred compound growth.
Another plus is that the child doesn’t need earned income, unlike a Roth IRA. Parents and grandparents can begin saving immediately after birth.
The $1,000 government contribution is also a meaningful incentive. Even if no additional money is added, that initial investment could grow substantially over several decades.
Finally, because anyone can contribute (subject to annual limits), the account can be an easy gift option for birthdays, holidays, or for grandparents who want to help build a child’s financial future.
The Downsides
Despite the attractive features, these accounts are not necessarily the best choice for every family.
The biggest drawback is tax treatment. There is no tax deduction when you fund the account, and withdrawals of the account’s earnings are taxed as ordinary income. That’s less favorable than a Roth IRA, where qualified withdrawals are completely tax-free.
If your primary goal is saving for college, a 529 plan will often be the better option because qualified education withdrawals are tax-free, and you may get a state tax deduction on contributions, depending on where you live.
Investment flexibility is also somewhat limited. Unlike a brokerage account, where you can choose from thousands of investments, Trump Accounts are generally restricted to broad-market index funds.
So, Should You Open One?
It may be worth considering, depending on your family’s goals, time horizon, and tax situation.. Think of it as another tool in the toolbox for saving for children. Families often use these accounts alongside other tools – a 529 plan for education savings and, once a child has earned income, a Roth IRA. The right combination depends on your goals and tax situation.
Over time, this layered approach can lead to meaningful tax-deferred compound growth and give a child a strong head start on their financial future.
You can open an account at www.trumpaccounts.gov.
This content is for informational and educational purposes only and does not constitute investment, tax, or legal advice, or a recommendation regarding any specific account type or strategy. Trump Accounts are newly established under federal law, and the rules described are based on current law and available guidance, which are subject to change; tax treatment and eligibility depend on your individual circumstances. Please consult a qualified tax professional before making any decisions. Investing involves risk, including the potential loss of principal, and growth is not guaranteed. Elevation Wealth Partners, LLC is a registered investment adviser.