An Investment in Your Child’s Future: Trump Accounts
Families will have a brand-new tool to help build long-term wealth for the next generation: Section 530A Accounts, also known as Trump Accounts. These tax-advantaged investment accounts are designed specifically for US citizens under age 18 who are born between January 1, 2025 and December 31, 2028, aimed at giving kids a meaningful financial head start at birth.
What Are Trump Accounts?
Trump Accounts are a new “starter retirement account” structured similarly to a traditional IRA but created specifically for children. They are expected to go into effect on July 4, 2026.
Each account:
- Is owned by the child, but managed by a parent or guardian until age 18
- Is designed for long-term investing, with funds placed primarily in diversified U.S. stock market index funds
- Allows tax-deferred growth, meaning investments can compound over time without annual taxes on gains
Are Trump Accounts Free Money?
Yes. The Trump Accounts pilot program offers a tax free $1,000 federal seed contribution for children born between Jan. 1, 2025 and Dec. 31, 2028, and who are U.S. citizens with a valid Social Security number. This initial contribution may seem modest at first glance, but when invested over many years, it has the potential to grow significantly through the power of compounding. As children grow, they can see their investments grow—helping them learn how markets work in real time.
In addition to the federal deposit, families, employers, nonprofits, or other approved contributors may add up to $5,000 per year per child to further build the account balance. Importantly, these contributions are entirely optional, allowing parents and grandparents to contribute at a level that fits their financial situation, including not at all. The overarching goal is simple: start early, stay consistent when possible, and allow time and market growth to gradually build long-term wealth for the child.
How to Get Started
The first thing new parents need to do is either file IRS Form 4547 with their tax returns or complete it online at https://form.trumpaccounts.gov/ to register the child. The child must have a social security number, which can be requested on the social security website. Most hospitals assist with the process of securing social security numbers for newborns.
Once Form 4547 is accepted, you’ll be contacted by a trustee (most likely BNY or Robinhood) with whom your account will be established, with further instructions on how to complete the account setup. The $1000 deposit will be made to that account. For easy tracking and updates, you may want to download the Trump Accounts: Official App, found in your app store.
“Gotchas” Parents and Grandparents Should Watch For
Like any financial tool, Trump Accounts come with rules—and a few potential pitfalls.
1. Not Every Child Gets the $1,000
Only children born between 2025–2028 who meet eligibility requirements receive the federal deposit. Older children can still open accounts—but won’t receive the seed money.
2. Contributions Are Not Tax-Deductible
Unlike some retirement accounts, contributions made after the initial $1000 are generally made with after-tax dollars. The benefit comes from tax-deferred growth, not an upfront deduction. Contributions must be made by December 31st of the contribution year.
3. Limited Investment Options
Funds must be invested in low-cost index funds tied to the U.S. stock market.
4. Restricted Access to Funds
Distributions from Trump Accounts are prohibited until January 1st of the year in which the child will turn 18. After that, withdrawals follow rules similar to IRAs, including taxes and early withdrawal penalties. This means that withdrawals before the beneficiary has reached age 59 ½ maybe be subject to a 10% penalty, in addition to regular taxes on the distributions. Exceptions exist for certain qualified expenses like higher education, first-time home purchase, and medical expenses. It’s an evolving program, and they are discussing additional exceptions for these special accounts, so it’s best to check in with your financial advisor for the specifics when it comes to withdrawals. Some of these rules make the account less flexible than a savings account or brokerage account.
5. One Account Per Child
Each child is limited to a single Trump Account, so families need to coordinate who sets it up.
Converting Accounts to a Roth IRA
One interesting idea is to have your child, once they turn 18, convert this account into a Roth IRA. These funds would then grow tax-free, and they’d avoid paying taxes on any distributions, assuming they let the funds continue to grow until age 59 ½. The benefit of this option is that they will most likely be in a tax bracket at age 18 where they pay little to no taxes at the time of the conversion, and then of course, pay no taxes upon distribution if they hold them until 59 ½. This is a topic to discuss with your Advisor, including avoiding the “kiddie tax,” and what the best option might be for your child’s situation.
Final Thoughts
As with any new legislation, details and rules surrounding Trump Accounts may evolve over time. Tax laws, eligibility requirements, and contribution guidelines could all change as the program is implemented and refined. It’s a good idea to set your child up with one, if only to get the free $1,000. How it’s used after that may require some conversations with your financial advisor. Specifically, the pros and cons of investing in this account versus a 529 or a custodial account and the finer details on investments and withdrawals within these accounts.
If you have questions about how a Trump Account might fit into your family’s financial plan, your HCM Advisor is here to help.