A Stake in the System: What Families Should Know About the New Trump Account

If you have children or grandchildren under the age of 18, you probably have questions about the new Trump Accounts (also called 530A Accounts). The announcement of this new investment option has opened a lot of discussion regarding how these accounts operate and where they stack up relative to other options for investing in your children’s future.

The "Trump Account”, which opened for enrollment as of this past July 4th, is a tax-advantaged investment account for children. You can open one for any U.S.-citizen child with a Social Security number at trumpaccounts.gov, and the money goes into a low-cost, broadly diversified U.S. stock index fund. Withdrawals from the accounts are locked until the child turns 18, at which point they can be tapped for education, a first-home downpayment, converted into a Roth IRA, or simply left to keep compounding.

Children born between 2025 and 2028 are eligible for an automatic $1,000 contribution from the federal government. There are some other opportunities for outside contributions, most notably from the Michael and Susan Dell Foundation, which has pledged to provide $250 to children residing in any zip code that has a median income less than $150,000. Over time, there is hope that programs like this will be expanded and more outside contributions will become available. These accounts are a great step forward in introducing the power of the free-market system to more people at a younger age and can grow into life-changing amounts of money in the decades to come, but it is important to understand the unique characteristics of these accounts and how they stack-up relative to existing investment options for children.

The Tax Situation

When it comes to taxes, there are three aspects of any account type that must be examined: How is the money going in taxed, how are any gains/income taxed inside the account, and how is the money taxed when it is pulled out. The Trump Accounts borrow features from a variety of existing account structures to create a unique tax treatment: Funds going into the account are “after tax” meaning there is no tax deduction for contributing, and investments grow tax-deferred while inside the account. Withdrawals are prohibited until the child’s 18th birthday, upon which the account automatically converts into a standard Traditional IRA.

From there, withdrawals are treated the same as they are for any other Traditional IRA: They are taxed at ordinary income rates until age 59.5 and assessed an additional 10% plenty (unless used for qualified higher-education expenses or certain other exemptions such as $10,000 towards a first-time home purchase or $5,000 for the birth or adoption of a child). After age 59.5, the penalty goes away but the ordinary income taxation on withdrawals continues. They will also be subject to the “Required Minimum Distribution” rule, meaning that account holders will be required to start pulling money out at some point (currently age 73, but this is likely to increase in coming decades).

That's the catch worth underlining and this represents the biggest downside to these accounts. For your own contributions, the tax treatment is arguably worse than a plain taxable account, because you're converting what would have been capital-gain income (taxed more favorably) into ordinary income. This is why, for most families, the Trump Account isn't likely the best place to start pouring large sums of your own money, though it can be a great option once other avenues have been exhausted or if flexibility is the most important factor.

One option is to plan on converting the Trump Account into a Roth IRA upon the child’s 18th birthday, which would require paying taxes at that point (at the child’s tax rate, which should be low- if not zero), but which provide immense benefits from tax-exempt growth moving forward. Roth IRAs are one of the most powerful account options available but require the accountholder to meet certain income thresholds (higher earners do not qualify) and have “earned income” equal to at least the amount being contributed; While most children won’t have a problem with the income limit, the latter requirement is difficult for most children, especially when before their teenage years. The lack of this earned income requirement is a key benefit of the Trump Account option.

The Real Value

The headline feature is a one-time $1,000 seed deposit from the U.S. Treasury for every eligible citizen child born between 2025 and 2028. If you have a child or grandchild born in that window, opening the account to capture the $1,000 is a no-brainer.

For children born before 2025 who missed that cutoff, private philanthropy has stepped in. Michael and Susan Dell have pledged $6.25 billion to seed accounts with $250 apiece for the first 25 million qualifying children. These contributions are reserved for children aged 10 and under, and in ZIP codes with median household income of $150,000 or less. Notably, kids already getting the federal $1,000 are not eligible for the $250 from Dell, as the gift is aimed at benefiting children the government program left out. If your family qualifies for this $250, simply opening the account will allow you to claim the contributions you are owed (you can check if you qualify at investamerica.org/dell).

Some good news: Contributions from governments and foundations don't count against the $5,000 annual contribution limit (which is $5,000 per child per year, with no income cap).

Employers can also chip in up to $2,500 per year (which does count toward the $5,000 limit), and these employee contributions are not considered to be part of the employee's income. Another note: Business owners can write off any contributions made to children of employees, so small business owners might benefit from using this as a key employee perk, or even as a way of making tax-efficient contributions for their own children.

How Does It Stack Up?

Before you make the Trump Account your primary savings plan, compare it honestly to what else is on the shelf. For education, New York's 529 plan offers tax-free growth for qualified educational expenses plus a state tax deduction on contributions, likely making this option a better deal if saving for college is the primary goal, but somewhat lacking in flexibility if you are putting money away with other objectives in mind. If your child has earned income from a real job, a custodial Roth IRA delivers truly tax-free growth and is probably the best option of them all if available. Additionally, a plain custodial brokerage account keeps the favorable capital-gains treatment the Trump Account gives up, though this may come with some Financial Aid consequences, something that both the Trump Account and Roth/Traditional IRAs avoid.

My general take: It’s a no-brainer to capture the contributions you don't have to fund yourself (the federal $1,000, the Dell $250, any employer match). Beyond that, think twice before making it the workhorse of your child's savings, and direct your own dollars where the tax treatment rewards you. However, the Trump Account can also be a great place to contribute once you have maxed out other options in a given year. Ultimately, it comes down to your specific tax situation, what you expect to use the funds for in the future, and how much you’re able to save each year for your child.

The Bigger Idea: A Generation of Investors

Setting aside the specifics for a moment and the most interesting thing about these accounts may be cultural rather than financial. A child whose money rides the U.S. stock market for eighteen years doesn't just accumulate a balance; He or she grows up as a small owner of American business, watching a stake compound through good markets and bad, learning in the most concrete way possible that building wealth is something ordinary people can do over time, through patience and hard work.

That lesson lands at a pivotal moment. In a 2025 Cato Institute/YouGov survey, 62% of Americans aged 18 to 29 said they held a favorable view of socialism, a figure that has climbed steadily over the past decade as this generation came of age through a financial crisis, a mountain of student debt, and a housing market that put ownership out of reach for many. These accounts can help to solve a real issue: It's hard to feel invested in a system that you don't believe you have a stake in. Accounts like these are a great start attempt to hand that stake over early, and to build the habit of investing before the paycheck years even begin. A young adult who opens a statement at 18 and sees years of quiet compounding has a concrete reason to see themselves as a participant in the market rather than as a bystander to it. That's how investors are made: It’s one thing to talk about the power of long-term investment, but it’s much more powerful when someone can see the benefits for themselves with real dollars. Giving more young people a personal stake in American enterprise, and a front-row view of what compounding does over a lifetime, is a goal worth taking seriously.

As always, the right answer depends on your family's specifics. A short conversation before December can ensure you're capturing every dollar you're entitled to and that you’re taking advantage of all the options available to your family. The fact that these accounts are centered on the next generation of investors, who could have time horizons of 60+ years, means that the costs and benefits of these decisions are magnified; Making a less-than optimal choice could cost hundreds of thousands of dollars in missed returns or extra taxes over the coming decades. To make the most of this opportunity, it’s always best to speak with an experienced Financial Advisor who can help you make the optimal choice for you and your family.

Robinson Crothers is Managing Partner at Great South Bay Advisors in Holbrook. This column is for general educational purposes and is not individualized investment, tax, or legal advice. Securities offered through Osaic Wealth, Inc., Member FINRA/SIPC.