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The Trump account savings vehicles that were created as part of last year’s Big Beautiful Bill are now available. If you have children younger than 18, should you open one of these 530A accounts for them?
If you had or plan to have a baby born between the beginning of 2025 and the end of 2028, you might as well open an account. For children born during that period who are U.S. citizens, a new account comes with an initial $1,000 deposit from the federal government. It makes sense to take advantage of that benefit.
What you might do with the account after that is a more complicated question.
Your family can put in up to $5,000 a year per child in addition to the initial $1,000 government deposit. This does not lower your taxable income the way a traditional IRA contribution does; it is after-tax dollars. Employers can also contribute if a company sets up the right kind of plan. The maximum employer contribution of $2,500 per employee each year counts toward the same $5,000 cap on contributions. Business owners who pay themselves a salary could use this to fund a child’s account with pre-tax dollars.
The money goes into a low-cost index fund. Every account starts in the State Street SPDR Portfolio S&P 500 ETF, which charges 0.02% a year. Over time, account holders can choose among four other broad-market index funds in the same low-fee range. The child takes control at 18, and from there the account works like a regular traditional IRA.
Tax Considerations and Alternatives
The new accounts have some features that do not compare favorably with existing options like 529 college savings plans or Roth IRAs.
When money comes out, the family contributions are tax-free. The earnings, the federal $1,000, and any employer contributions are taxed as ordinary income. Nothing can be taken out of a Trump account before the year the child turns 18, so the money is no help in an emergency.
