Should you open a Trump Account for your child?
What the new 530A accounts actually do, who gets the free money, and where we'd pass.
We read the evolving rules of 530A Accounts (aka Trump Accounts) ahead of them launching in July of this year. One of the first things I did was the math on my own two kids: They were born in 2021 and 2023, which puts both of them outside the window for the $1,000 the federal government is handing out.
Then I found the second pot of money, $250 from the Dell family, pointed at the kids the federal seed skipped. My children are the right age for that one, so I pulled up the eligibility checker, typed in our ZIP code, and struck out again.
Two dead ends in about ten minutes. Annoying as a parent but useful as a planner, because it forced me to separate the two questions families keep asking us:
Should I open one of these? And should I put my own money in it?
Those have very different answers.
What a Trump Account is
A Trump Account is a retirement account for your child, funded by you, while your child is still a child. Formally it's a Sec. 530A account, created by the One Big Beautiful Bill Act in July 2025 and these accounts are officially open for business as of July 4, 2026.
You put money in and it gets invested. Nobody can take it out, including you, until the year your child turns 18. Then it becomes a traditional IRA and your kid owns it.
That's the whole account. The rest is mechanics, and the mechanics are odd enough to walk through:
You can put in $5,000 per child per year for 2026 and 2027, indexed for inflation after that. Up to $2,500 of it can come from your employer or your child's, and that money counts inside the $5,000 rather than on top of it. Employer contributions aren't taxed to you or to your child, which makes them the closest thing to a free lunch.
Your own contributions aren't deductible. What you get is tax-deferred growth. Since the money went in after tax, it creates basis, so that piece comes back out tax-free and the growth gets taxed as ordinary income. The government seed, employer money, and any charitable deposits don't create basis, so all of that comes out fully taxable.
Nothing comes out during the "growth period," which runs from the day you open the account until the start of the year your child turns 18. Not for tuition, not for an emergency. The only exits during this time are the child's death or a return of excess contributions.
Investments are limited to broad U.S. equity index funds with no leverage. All investment options have low fees, capped at 0.1%.
At 18 it becomes a traditional IRA, which brings the 10% early withdrawal penalty until 59½ unless an exception applies.
Who actually gets free money
There are two pots of free money, and they're tested in completely different ways.
The $1,000 federal seed goes to children born between January 1, 2025 and December 31, 2028 who are U.S. citizens with a valid Social Security number. That's the whole test. No income limit, nothing about where you live. Your household could clear $5 million and your 2026 baby still gets the $1,000.
You do have to go get it, though. That means making the election on IRS Form 4547, actually opening the account (Treasury won't fund a child who doesn't have one), and being the person who claims that child as a qualifying child on your return.
The $250 Dell deposit is private money, a $6.25 billion pledge from Michael and Susan Dell announced in December 2025, aimed at the kids the federal seed left out. Your child has to be 10 or younger, born before January 1, 2025, and living in a ZIP code with a median household income below $150,000. First 25 million accounts only.
Neither deposit counts against your $5,000 annual limit.
Now go back and read that ZIP code test again, because it's the part that catches people offguard. It measures the neighborhood, not your personal income. A family earning $700,000 in a moderate-income ZIP qualifies. A family earning $250,000 in an expensive one doesn't. This means a lot of the families we work with, clustered in expensive California ZIP codes, are going to find their children locked out of both pots. Better to know that before you spend a Saturday with Form 4547.
If you want to check your own situation, the Invest America Charitable Foundation has a tool that takes a birth year and a ZIP code. It’s worth it to keep checking your child’s eligibility from time to time. For example, Dalio Philanthropies has pledged $250 deposits for eligible kids in Connecticut, and more foundations will probably follow.
Our position on the free money is simple: If your child qualifies for either deposit, open the account and take it. There's no version of this where turning down free money inside a tax-deferred account makes sense. Whether you fund it beyond that is the harder question, and the answer moves with your child's age and your tax bracket.
Why you might fund one yourself
Time, mostly. Money invested for a 2-year-old sits for something like 57 years before that child can touch it without a penalty. A custodial Roth IRA does something similar, and does parts of it better, but it needs your child to have earned income. We laid out that whole strategy back in January. What the Trump Account has going for it is that it never asks whether your child has a W-2.
The other reason comes up in our meetings often. A family has fully funded the 529s and they want to keep going. The usual next stop is a taxable UTMA or UGMA, and once the child's unearned income clears roughly $2,700, the kiddie tax taxes it at the parent's marginal rate instead of the child's. If you're in the top bracket, that's a small leak every year for eighteen years. A Trump Account plugs the leak. If you've maxed contributions everywhere else and are hunting for one more (admittedly small) tax-deferred bucket for your kids, the Trump Account should be considered.
Where that argument breaks down
Everything that comes out of a Trump Account is ordinary income. That includes what would have been qualified dividends and long-term capital gains, which get preferential rates in an UTMA. You're swapping a small annual tax drag now for a worse rate on the entire balance decades later. Which side wins depends on your bracket today, your child's bracket then, and how long the money compounds. For a newborn, decades of deferral probably still win. For a 14-year-old, four years of deferral against a permanent loss of capital gains treatment is a bad trade. Your child's age matters more here than your bracket does.
Where we'd pass
Five things give us pause.
It shouldn't crowd out your 529
A 529 and a Trump Account are solving different problems. The 529 pays for school, comes out tax-free for qualified education expenses, and is there when your kid is 18 and standing in front of a tuition bill. The Trump Account is locked until 18 and penalized until 59½. So if education funding isn't finished, finish it. We expect this to be the most common mistake families make with these accounts, and it's an expensive one, because there's no undo button.
It may cost your child financial aid
A Trump Account sits in your child's name, and aid formulas treat student-owned assets much more harshly than a 529 the parent owns. How much that actually costs a family, nobody can say yet. The formulas haven't caught up to an account type that's a few weeks old. If aid is part of your plan, file this one under unknowns.
It's easy to overfund by accident
The $5,000 cap is per child, and money can arrive from you, your spouse, grandparents with a QR code, and an employer. Nobody is coordinating that for you. Currently, if you go over the limit, Robinhood (the brokerage Treasury picked to hold these accounts) sweeps the excess into a separate custodial account, where earnings are taxable and the kiddie tax applies. Though nothing blows up, you just end up in the exact account you were trying to avoid.
100% U.S. stocks, and that's it
During the growth period, the law limits you to broad U.S. equity index funds charging 0.1% or less. Today that's a handful of S&P 500 and total U.S. market funds. The list will keep growing, but the restriction to U.S. equities is written into the law itself.
This is the part we like least, and if you’re a Mana client you probably know why. We build globally diversified portfolios for our clients. An account that mandates U.S. large cap for eighteen years, with no ability to rebalance into anything else cuts against how we invest every other dollar a family has. For $1,000 of the government's money, fine, we'll take it and say thank you. For $5,000 a year of yours for eighteen years, expect us to push back. Talking people out of concentration risk is a good chunk of our job.
Robinhood is the only door in
Treasury named Robinhood, working with BNY, as the sole initial administrator and trustee, so every new Trump Account in the country opens there. Other custodians have said they'll accept transfers eventually, but none are taking them yet. And one more thing: your financial advisor can't open, trade, or manage this account for you. The whole program is direct-to-consumer with no way to hand it off.
The account opening process runs backwards
Every other account you've opened started with picking an institution. This one starts with a tax form. You file IRS Form 4547, wait for the IRS to accept it, activate the account on Robinhood's site, then fund it.
Our client guide walks through each of those steps, including exactly what Form 4547 asks for and where the $1,000 election sits on it. Ask us for it and we'll send it over.
One thing to keep straight: trumpaccounts.gov is the government's information site. trumpaccount.com is where your real account lives. One letter and one domain apart, and they look almost identical. A brand-new federal program, millions of new accounts, and two nearly identical URLs is a phishing setup waiting to happen. If an email about your child's account gives you any pause, forward it to your advisor before you click.
What happens when your child turns 18
On your child's 18th birthday the account becomes a traditional IRA and they own it. Outright. Every decision that used to be yours is theirs: how it's invested, whether to convert to a Roth while they're in a low bracket, who the beneficiary is, whether to leave it alone for another forty years. From January 1 of the year they turn 18 until the actual birthday, nothing moves. No contributions, no withdrawals, no transfers, and the investment restrictions stay put.
They inherit some homework too. During the growth period the custodian tracks the basis for you and sends a Form 5498-TA every year, which is more help than a regular IRA gives you. That stops at 18. After that, your child will be responsible for tracking the basis themselves, generally on Form 8606, so they get the tax-free piece of any withdrawal down the road.
I think about this part more than the tax mechanics, and it has almost nothing to do with tax. An 18-year-old is going to get a login, a balance, and a 1099-R for a rollover they never asked for. Maybe that becomes their first real conversation about investing. Maybe it becomes a withdrawal with a 10% penalty attached and a lesson learned the expensive way. Which one you get depends almost entirely on what you've said to them in the eighteen years before that birthday, and there's no IRS notice for that part.
Where we land, for now
If your child qualifies for the $1,000 or the $250, open the account and take it. It’ll be an hour of paperwork for free money. If they qualify for neither and education funding isn't finished, put the money in the 529 and move on.
If you've maxed the 529s, you're watching the kiddie tax nibble at a custodial account every year, and your child is young enough that decades of deferral can outrun the loss of capital gains treatment, this is worth considering.
If your employer starts offering contributions, pay attention. That's compensation you'd otherwise leave on the table, and it isn't taxed to you or your child.
One caution over all of it: These accounts run partly on proposed regulations and the program is weeks old. The rules around transfers and investment menus will keep moving through 2027, and the financial aid question is a real unknown.
We put together a client guide that goes through all of this in plain language: eligibility, taxes, the step by step, contribution limits, what happens at 18. Please send an email to hello@manafld.com if you’d like a copy.
My kids missed both pots by a couple of years and a ZIP code, so for our family it came down to whether another locked-up, U.S.-only account earned a spot ahead of the 529s and custodial accounts we already have, and right now I don't think it does. That could change if an employer starts contributing, or if the fund menu opens up.
For the family with a baby born last year, the answer changes, and what it turns on is the stuff no blog post can know: how much of college you've covered, what bracket you're in, whether anyone's matching, how you feel about handing an 18-year-old the keys to an IRA.
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Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.