Practical Money: Trump Accounts... Yay or Nay?
Are Trump accounts worth it?
Introduction
It’s not often that a new financial account shows up that makes people immediately pick a side without caring about how it works. But the newly created “Trump Accounts” - officially known under the tax code as Section 530A Accounts - does just that.
Before anyone starts drafting angry Facebook comments, this newsletter is not about politics. I don’t care whether you love Trump, hate Trump, voted for him, voted against him, or have already muted three relatives because of Thanksgiving dinner debates.
Regardless of how they got their name, these accounts are simply a new piece of the federal tax and financial landscape. For parents, understanding how they work is strictly a matter of smart financial planning.
In my last newsletter, I broke down how to strategically engineer wealth for your children using a cocktail of 529 plans, Custodial Roth IRAs, direct investing, and piggybacking them onto your credit cards. In this newsletter, I will look at Trump accounts - which I’ll refer to as 530A accounts for the rest of the newsletter because I'd rather spend my time talking about compound interest than moderating a comment section.
I’ll cover how they work, how they stack up to other vehicles like 529 and custodial ROTH IRA accounts, and whether I plan to open one for my daughters.
A quick reminder, because the lawyers told me to: this is not financial advice. I am not a fiduciary, a CPA, or even particularly good at assembling IKEA furniture. This is just me sharing my strategies, investments, stocks, index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different—some of you want a yacht, others just want to stop looking at your 401(k) statements. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not a substitute for advice from a qualified professional who actually knows your situation and charges by the hour.
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What Are 530A Accounts?
530A accounts are a new type of tax-advantaged investment account available for American children under age 18. Think of them as a Traditional IRA, but with special training wheels designed for minors. They are now live, and contributions can be made.
The accounts allow contributions while a child is under 18, and the money grows tax-deferred. Unlike custodial ROTH IRAs, the child does not need earned income to participate. So yes, your toddler can start investing before they've mastered using a spoon.
All contributions are currently invested in the State Street SPDR Portfolio S&P 500 ETF (SPYM), a low-cost index fund tracking the S&P 500. Apparently even Congress knows that trying to beat the market usually ends with tears.
For children born between 2025 and 2028, the government also provides a one-time $1,000 contribution when the account is established. My daughters missed that window by about a decade and a half, because apparently timing your children’s births around future federal tax incentives is tough.
On January 1st of the year the beneficiary turns 18, the account automatically loses its specialized "growth period" restrictions and converts into a Traditional IRA, with the child receiving full ownership of the account.
Here are some of the key rules:
Eligibility: Any U.S. citizen under the age of 18 for the calendar year with a valid Social Security number. Note that it goes by calendar year, so if your child is 17 now but turns 18 later this year, you can’t contribute.
Annual Contribution Limit: Up to $5,000 per year total across all sources (indexed for inflation after 2027).
Who Can Contribute: Parents, grandparents, friends, and even employers (up to $2,500 of the total limit).
Withdrawal Restrictions: None. Zero. Zip. The money is locked up until the account converts.
How To Open A 530A Account
Opening a 530A account is relatively simple. You just follow these steps:
Sign up at TrumpAccount.com. There you will register and find links to file IRS Form 4547.
Download the app and sign in. From there, you can set up a financial institution or debit card to make contributions.
Begin contributing. Contributions opened up this past weekend on the 4th of July. You will be given the option to make a one-time or recurring contribution.
530A Accounts Vs. Other Savings Vehicles
Like every financial account ever invented, the answer to “Is this the best one?” is...
“...it depends.”
Everyone’s favorite financial answer.
The right account depends on what the money is for and whether your child has earned income. If you haven’t already, please check out my last newsletter - “How To Make Your Kids Rich” - for details on Custodial Roth IRAs and 529s.
530A Accounts vs. Custodial Roth IRA
For my family, the Custodial Roth IRA still wins because both of my daughters have part-time jobs.
A Custodial Roth IRA offers a higher contribution limit ($7,500 vs. $5,000) and a guarantee that every dime of growth is 100% tax-free forever, without requiring future conversion gymnastics involving IRS publications, tax professionals, and mild anxiety.
That said, if your child doesn’t have earned income - which describes most toddlers and a surprising number of teenagers - the Custodial Roth IRA isn’t even an option. In that case, the 530A Account wins by default simply because you can actually use it. Sometimes the best investment account is the one you’re legally allowed to open.
530A Accounts vs. 529s
If college or trade school is likely, I still think the 529 wins. Tax-free education withdrawals are hard to beat, and recent rule changes even allow up to $35,000 of unused funds to eventually roll into a Roth IRA.
Both of my daughters are tracking toward college, so our 529 plans aren't going anywhere. But if higher education or trade schools aren’t part of the plan, the 530A becomes much more attractive because it has nothing to do with education.
My Take
For my family, I don’t see this as an “either/or” decision mostly because I enjoy overcomplicating my own financial life. If I could rank them, my current order would be:
Custodial Roth IRA (since my kids have earned income).
Feed the 529 Plan (college is happening, whether they like it or not).
Deploy excess cash into the 530A account as an extra, insulated tax-advantaged bucket.
They’re different tools for different jobs, kind of like owning both a hammer and a chainsaw.
So... Am I Doing It?
If my daughters qualified for the free $1,000 government contribution, this would’ve been the easiest financial decision I’ve made all year. Sadly, they were inconsiderate enough to be born too early.
Despite missing out on Uncle Sam's sign-up bonus, I still opened 530A Accounts for both daughters and made the initial contributions. The reason isn’t the government contribution.
It’s what happens after age 18.
Once these accounts hit the magic age of 18 and morph into standard Traditional IRAs, it opens up a pathway to execute a voluntary, active rollover into a Roth IRA. After conversion, the money grows tax-free, and qualified withdrawals in retirement are also tax-free. If there’s one thing I enjoy almost as much as compound interest, it’s legally paying less tax over the next 50 years. But there are a lot of things to consider, which I’ll get to momentarily.
A quick detour to have the numbers to let the numbers do the talking. We’ve been contributing to our daughter’s Roth IRAs ever since they started working at their dance studio.
With gains, my 17-year-old daughter’s account is at about $4400. We can only do 1 year of 530A contributions before she turns 18. Assuming that the market is flat from now until she turns 18, after the rollover, her Roth account would be worth $9400. Without the 530A rollover, at $4400 and no future contributions while assuming 10% annual growth, her account would be worth $388,000 when she turns 65. At $9400, that account would be worth $829,000 at age 65.
Using the same example for my 15-year-old, her Roth account also sits at $4400. We have 3 years - or $15,000 - of contributions to her 530A account before she turns 18. Again, assuming the market stays flat for that duration, her Roth account would be worth $19,400 after the conversion at age 18. With contributing another dollar and assuming 10% annual growth, her account would be worth $1.7 million at age 65.
Now imagine that a child receives $5,000 per year from birth to age 18 ($90,000 total). Let’s say the market stays implausibly flat for those 18 years, so the total value remains at $90,000 when it’s fully converted at 18. Assuming 10% average annual returns, the account could grow to approximately $7.9 million in tax-free assets by retirement at 65. Talk about time in the market…
💡 Practical Money Trivia
If someone contributes $5,000 annually from age 18 to 28, then never invests another dollar, they’ll often end up with more retirement money than someone who waits until age 28 and contributes $5,000 every year until age 65 (assuming similar investment returns).
Starting early beats investing longer.
The Roth Conversion Strategy
This is where things get...fun. And by “fun,” I mean the kind of fun where you find yourself reading IRS publications on a Saturday night wondering where your life took a wrong turn.
I’ll absolutely be working with my tax professional when the time comes to do the conversion because these accounts are brand new and the IRS still has plenty of opportunities to make this more complicated.
Here are some important items to keep in mind:
Conversion triggers a tax bill. The converted amount is treated as ordinary income in that year. Only after-tax personal contributions (your “basis”) come out tax-free; all pre-tax growth is taxable.
Partial conversions are allowed. You do not have to convert the entire balance at once. You can execute partial conversions across multiple years when your kid is in a rock-bottom, starving-student tax bracket.
Each conversion starts a 5-year clock. Every converted amount must remain in the Roth for 5 years before it can be withdrawn tax- and penalty-free.
Confused yet? Wait, there’s more. There’s also the matter of whether the “kiddie tax” applies (in my case, it does).
What The Hell Is A “Kiddie Tax”?
The Kiddie Tax is Congress’s way of saying, “We know exactly what you’re trying to do.” It prevents wealthy parents from shifting investment income to their children simply to take advantage of lower tax brackets.
In simple terms, the “kiddie tax” determines whether the conversions are taxed at the child’s rate or at the parents’. It’s a federal rule designed to prevent parents from shifting investment income to their children to take advantage of lower tax brackets.
Under this rule, a child’s unearned income (which includes Roth conversion income) above a certain threshold - currently $2,700 for 2026 - that money is not taxed at the kid's cute little bracket. It is taxed at the parents’ top marginal tax rate.
At this point, even writing this made me tired.
Anyway, I find this to be the single biggest planning pitfall for the 530A Account Roth conversion strategy. If you convert a large balance while the kiddie tax still applies, a high-earning parent in the 32% or 37% bracket could see most of that conversion taxed at their top rate, entirely defeating the purpose of converting in a low bracket.
Rather than spend three pages explaining the rules, I asked AI to summarize them because AI enjoys tax law more than I do:
Kiddie Tax Rules
Under age 18: Always applies. No exceptions based on income or dependency status.
Age 18: Applies if the child’s earned income does not exceed half of their own financial support for the year.
Ages 19–23 (full-time students): Applies if still a full-time student and earned income is less than half of financial support — i.e., largely supported by parents.
Age 24 and above: Never applies. The child’s own tax bracket governs entirely — this is the safe zone.
My “Tentative” Conversion Plan
The Kiddie Tax will apply to us until my kids are financially independent or turn 24. The best strategy would probably be to convert only the contribution portion initially (which are tax-free because they are after-tax basis) and leave the gains in the Traditional IRA until the Kiddie Tax no longer applies.
However, my oldest daughter only has six months before her 530A account becomes a Traditional IRA, while my youngest has 2 1/2 years. Their gains will likely be fairly modest, so I'll probably just convert everything once they become eligible and pay whatever tax results. Sometimes the mathematically optimal strategy isn't worth years of waiting and administrative headaches. Plus, it clears the deck and gives the money maximum runway to compound cleanly.
Bottom line is… If you try to navigate this without a certified CPA holding your hand, you are asking for an accidental IRS audit.
Also Read
Conclusion
One of the biggest advantages parents have is time. Most teenagers don’t fully appreciate how valuable a decade of investing can be, let alone five decades. To be fair, most teenagers are focused on more pressing issues like whether someone left them on read.
If a new account structure gives my daughters another opportunity to build wealth early, I’m interested. Not because of the branding. Not because of the politics. Because compound interest has never once checked someone's voter registration.
Thankfully, neither has the S&P 500.
That's it for this week! As always, no financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert. If you haven’t already, please subscribe to this newsletter below and never miss an update: