Trump Accounts: Yay or Nay?
Photo by Diane Helentjaris on Unsplash
Well, they are finally here. Section 530A accounts, more commonly known as Trump Accounts, are now available as of July 4, 2026.
What's a Trump Account, you ask?
It's a new savings vehicle that gives families another way to invest for a child's future, in addition to more common accounts such as 529 plans.
Think of it as a hybrid between a custodial investment account, a Traditional IRA, and a 529 plan. The goal of these accounts is simple: get children invested early and allow decades of potential growth.
Let's start by going through what they are and how they work. Then we'll get into what I think of them.
How Do They Work?
Any child under age 18 with a Social Security number can have a Trump Account. The account is owned by the child but managed by a parent, guardian, or other authorized adult until the child reaches age 18.
One of the most talked-about features is the federal government's $1,000 starter contribution for eligible U.S. children born between January 1, 2025, and December 31, 2028. Families can also contribute additional money, generally up to $5,000 per year.
Probably the best way to think about these accounts is that they are essentially retirement accounts for children where the child doesn't need to have earned income (earned income is required for Traditional and Roth IRA contributions).
Once the child turns 18, the account turns into what's basically a Traditional IRA.
How Do You Open One?
As we understand it, the general process of opening an account goes something like this:
Visit the official Trump Accounts website or app.
Verify your identity through the IRS process.
Complete the required election form (IRS Form 4547).
Wait for IRS approval.
Activate the account using the child's Social Security number and basic personal information.
As of now, the account must be opened at Robinhood. Later rollovers to Schwab, Fidelity, Vanguard, and other institutions are expected to be available at some point.
Potential Benefits
Government seed money for eligible children born from 2025 through 2028.
Tax-deferred growth, allowing investments to compound over time.
Anyone can contribute, including parents, grandparents, friends, employers, and charitable organizations.
Funds must be invested in broadly diversified U.S. stock index funds, helping keep costs low and encouraging long-term investing.
Funds could later be converted to a Roth IRA in the right circumstances. This can be a very powerful benefit, but would take a good amount of financial planning knowledge and attention.
Potential Drawbacks
Like any financial planning strategy, Trump Accounts are not a perfect fit for everyone.
The annual contribution limit is relatively modest.
Investment choices are limited.
Flexibility is limited.
Funds are locked up until adulthood, and generally not available without paying taxes and penalties until retirement.
Any growth of the funds will be subject to future taxation at ordinary income tax rates.
Keeping track of your contributions over many years is important for tax reasons, so this may prove to be administratively difficult unless the information is retained by the initial and future investment custodians.
Yes, these accounts are tax-deferred, but you may get better tax treatment from other accounts:
529 plans offer tax-free withdrawals for education expenses.
Roth IRAs offer tax-free withdrawals during retirement.
Taxable brokerage accounts offer long-term capital gains tax treatment, which is better than ordinary income tax treatment.
This is a bit unclear to me, but I believe that if a child passes away with a Trump Account (before age 18), the account is immediately distributed and taxed to the beneficiary, as opposed to being received as an Inherited IRA.
This next one is something that will vary wildly from person to person, but some people may have an issue with putting their money into an account that is named after someone rather controversial or who may not align with their political leanings. Of course, investing in this account type isn't an "endorsement" of the person it's named after, but this could be an issue for some people.
What's the Money For?
Given these benefits and drawbacks, I think it's helpful to think about what the money is being saved for. The answer to that question may help dictate which account(s) you should use.
Here's my take:
The child's education: I prefer 529 plans due to the tax-free withdrawals.
The child's early-to-mid adult needs (like buying a house): I prefer taxable brokerage accounts due to their flexibility.
The child's retirement: I prefer Roth IRAs if the child has earned income. But if the child doesn't have earned income, this is where Trump Accounts can be the most helpful.
So, Keith, Will You Be Opening One?
Probably not.
"But Keith, you listed a bunch of cool benefits above! Why won't you open one?"
Well, let's not forget about the drawbacks listed above. I think they are material.
And, depending on the intended usage, other account types are much more attractive.
All in all, I think they are fine, but personally I don't see them as great vehicles compared to other options, unless you can get the free $1,000 (or qualify for any of the other contributions that have been promised by some individuals).
The Bottom Line
For families with young children, especially those eligible for the government's $1,000 contribution, a Trump Account may be an attractive way to jump-start long-term savings. However, it is best viewed as one tool among many, rather than a replacement for 529 plans, Roth IRAs, and taxable brokerage accounts, as those accounts may be a better fit depending on how you're thinking about the money.
As always, the right choice depends on your family's goals, tax situation, and overall financial plan.