Even before the passage of the One Big Beautiful Bill Act (OBBBA) last July, American savers faced a dizzying array of retirement account options, each with their own tax treatment and rules surrounding contributions, withdrawals, and eligibility. The OBBBA adds yet another type to the mix, officially dubbed the Section 530A account, but better known as the “Trump Savings Account.” How should we think about this new kind of account, and does it make sense to open one for your child?
Probably the most important thing to know is that Trump Savings Accounts can be thought of as a Traditional IRA for children, meant primarily to kick-start their retirement savings. But there are a few key differences:
- Parents can open a Trump account on behalf of their dependent child, who must be under 18 and a US Citizen. The accounts are expected to become available in July of 2026.
- Unlike traditional IRAs, contributions made by individuals are not tax-deductible. They are instead funded with post-tax dollars, similar to Roth IRA contributions. Accounts are held in the child’s name, with parent(s) acting as custodian until the child turns 18, at which point the child beneficiary becomes the owner.
- Parents, relatives, and other individuals can contribute up to $5,000 per year per child until the year the beneficiary turns 18. Unlike IRAs, the child does not need “earned income” to make contributions, and there are no income-based restrictions. Note that other IRA/Roth IRA accounts are not affected by contributing to a Trump account.
- Eligible children born between January 1, 2025, and December 31, 2028, receive a one-time $1,000 deposit from the federal government. All U.S. citizens under age 18 are eligible to open an account, but only those born in the 2025–2028 window will receive this seed money.
- Employers may contribute up to $2,500 annually toward the $5,000 cap, and those contributions are deductible as a business expense to the company.
- Funds must be invested in low-fee mutual funds or ETFs that track broad market indices, such as the S&P 500. According to the trumpaccounts.gov website, investments may be limited to American companies only. Investments inside the account grow tax-deferred; taxes aren’t due until withdrawals begin.
- Generally, withdrawals are not allowed before the child turns 18. After age 18, the account balance is available for withdrawal but subject to ordinary income taxes on earnings and “non-individual” (e.g. employer) contributions. They are also subject to a 10% early withdrawal penalty before age 59 ½, except for certain limited circumstances, including first time home purchase, educational expenses, business start-up costs and birth or adoption costs.
Should parents consider opening a Trump Savings Account for their kid(s)?
For children born in 2025 – 2028, opening a new Trump account makes a lot of sense – even if only to receive the free $1,000 government seed money. At a 10% annual return, $1,000 invested at birth could grow to almost $300,000 by age 59½, even in the absence of any more contributions. For other children, however, the decision is less clear. There is no tax benefit for parents who contribute to a Trump account, and the tax treatment of withdrawals is less favorable than that of Roth accounts, 529 plans, or UTMA accounts. But Trump accounts do fill a niche that wasn’t available before–a tax-deferred retirement account option for children without earned income. Another potential benefit–children may be more inclined to learn about personal finance and investing if they can point to an account held in their own name. For parents trying to decide where to save the next dollar, they should know that a 529 plan remains the best option for college savings. But for those with the ability to fund multiple accounts, a Trump account can make sense as a complimentary way to build additional savings.
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