530A Accounts (“Trump Accounts”): What Families Need to Know

A new tax-advantaged savings option for children opens for funding on July 4. Here’s how it works and what to consider.

Starting July 4, a new type of retirement account for children created under the One Big Beautiful Bill Act and formally known as a “Section 530A account” (and informally as a “Trump Account”) will be open for contributions. Parents and guardians can already open accounts ahead of that date, and a number of clients have asked us how these accounts work, who they’re for, and whether they fit into an existing gifting or education-funding strategy. Below, we walk through the basics.

What is a 530A account, in short?

A 530A account is a tax-advantaged retirement savings account opened on behalf of a child. Parents, guardians, and others can contribute to the account until the child turns 18, at which point ownership transfers fully to the child. From that point forward, the account behaves much like a Traditional IRA: withdrawals are possible, but amounts taken out before age 59½ generally carry the same early-withdrawal penalties (with some of the same exceptions) that apply to IRAs today. The account can also be rolled into a Traditional IRA or converted to a Roth IRA once the child takes ownership.

The numbers at a glance

Who’s eligible, and who gets the seed money?

Any U.S. citizen child under age 18 with a valid Social Security number can have a 530A account opened on their behalf, one account per child. The account must be opened by a parent or legal guardian — or by someone who attests that the child’s parent isn’t available to do so.

The government’s $1,000 seed contribution is narrower: it’s reserved for children born between 2025 and 2028 who otherwise qualify for the account. Children outside that birth-year window can still have an account opened for them — they simply won’t receive the federal seed deposit.

How do families get started?

Families can opt in at irs.gov/trumpaccounts. Two institutions currently support 530A accounts: BNY and Robinhood. We expect more providers to come online as the program matures.

Contribution rules

The annual contribution limit is $5,000 per child, combined across all contributors — parents, family members, friends, and employers all draw from the same cap. There’s no income tax deduction for individual contributions, and no further contributions are allowed in the year the child turns 18.

Employers have a bit more flexibility: they can make matching contributions and allow employees to contribute through Section 125 cafeteria plans, subject to nondiscrimination testing.

How is the money invested?

Until the child turns 18, investment options are limited to U.S. index funds. International funds and bonds aren’t permitted during this growth period. This is one of the more distinctive features of 530A accounts compared with other custodial or education-savings vehicles, which often allow broader fund menus.

What happens at age 18?

Ownership of the account passes entirely to the child. From there, the account can be rolled into a Traditional IRA, or converted to a Roth IRA. Conversions trigger tax on any non-basis amount in the account — generally the earnings and seed money, not the contributions themselves — and “kiddie tax” rules apply to that taxable portion.

A few things to watch for

• No withdrawals are permitted before the child turns 18, regardless of circumstance.
• Early withdrawal penalties apply before age 59½, though exceptions mirror those for IRAs today — including qualified education expenses, up to $10,000 for a first-time home purchase, and up to $5,000 for the birth or adoption of a child.
• Several states — California, Massachusetts, Kentucky, Hawaii, South Carolina, Wisconsin, and Pennsylvania — currently plan to tax account earnings at the state level, even though the federal treatment is tax-advantaged.
• A gift tax return may be required for direct contributions, depending on the amount and who is contributing.

Is this better than a 529 plan or other account for minors?

It depends on your goals for the money. A 529 plan remains a strong choice if the priority is education funding, since qualified withdrawals for tuition and related expenses are tax-free. A custodial account (UTMA/UGMA) offers more flexibility in how funds can be used, with fewer restrictions on timing or purpose. A 530A account is best understood as a retirement head start — a way to give a child decades of compounding before they’ve even entered the workforce — and it may work well alongside, rather than instead of, those other tools.

Please contact your wealth advisor to discuss how funding these accounts fits into your overall gifting strategy.

This article is for general informational purposes and does not constitute tax, legal, or investment advice. Rules for 530A accounts are still being finalized by Treasury and the IRS and may change; please consult your tax advisor before opening or funding an account.