530A Trump Accounts: Do They Make Sense for Your Family?

This month, I want to answer some client questions on 530A Trump Accounts, the new retirement accounts for children that officially launched this summer. They have received plenty of attention, but as is often the case with new financial rules, the details matter more than the headline. We will look at who may benefit, why the age of the child matters, what happens when the child turns 18, and why opening one is more complicated than opening a typical IRA.

I also have updates on our new Advyzon client portal, an invitation to our office open house, the latest estimate for Social Security’s 2027 cost-of-living adjustment, and an update on our portfolio allocations.

Trump Accounts are a new type of retirement account designed for children. At first glance, the concept is fairly simple. A parent, grandparent, or someone else contributes money while the child is young, the money is invested, and ideally it has decades to compound.

The details are considerably less simple.

These accounts have some attractive features, particularly for younger children. But they also come with special contribution rules, investment restrictions, tax-recordkeeping issues, and an account-opening process that is quite different from opening a regular IRA at custodians like Fidelity or Schwab.

For families considering one, I think the two most important questions are the age of the child and what you ultimately want the money to accomplish.

How Trump Accounts Work

A Trump Account can generally be established for an eligible child who has a Social Security number and has not reached the year in which he or she turns 18. The first contributions were allowed beginning July 4, 2026.

During the period before the calendar year in which the child turns 18, parents, grandparents, the child, and others can generally contribute up to a combined $5,000 per year. Employer contributions count toward that limit and are separately capped at $2,500, while certain government, charitable, and rollover contributions are excluded. The $5,000 limit is scheduled to begin adjusting for inflation after 2027.

Unlike a regular IRA, the child does not need earned income for these contributions to be made.

There is also a special federal contribution that has understandably received a lot of attention. Eligible U.S. citizen children born after December 31, 2024, and before January 1, 2029, can receive a one-time $1,000 government contribution if the required election is made (these $1,000 government contributions don’t count toward the $5,000 limit discussed above).

For a family with a child or grandchild who qualifies for the $1,000 contribution, I think it is worth understanding the account. That free money is probably worth a little paperwork.

Why Age Matters

For me, one of the most appealing features of Trump Accounts is simply time. Imagine opening one for a child who is a year or two old. There could be 15 or more years to make contributions before the special childhood contribution period ends. More importantly, money invested at that age could potentially remain invested for another 60 years before retirement.

Even modest annual contributions can become meaningful when they have that much time to compound.

The calculation is different for a child who is already 16 or 17. There may be only a year or two to contribute under the special Trump Account rules, and if the child isn’t eligible for the $1,000 government contribution, the advantages may be less compelling.

That doesn’t mean the account is a bad idea for an older teenager. It simply means I would be less inclined to open one in that situation.

If the teenager already has earnings from a job, a Roth IRA may also deserve consideration. And depending on the family’s objective, a 529 plan, custodial account, trust, or an account owned by the parents could be a better fit.

The Account Belongs to the Child

This is an especially important point for parents and grandparents.

Although a parent or another authorized adult manages the Trump Account while the child is a minor, the account is established for the exclusive benefit of the child. It is the child’s retirement account, not the parent’s or grandparent’s account.

The special Trump Account “growth period” ends on December 31 of the year before the child turns 18. Beginning January 1 of the calendar year in which the child turns 18, the special childhood rules generally end, and traditional IRA rules begin to apply.

The child generally takes control once he or she actually reaches age 18, subject to applicable state law and the custodian’s procedures.

That distinction is worth thinking about before making large contributions. You are not setting aside money that you can later redirect to another grandchild or use for a different purpose. You are putting money into an account that belongs to that child.

What Happens at Age 18?

Once the growth period ends, the account is generally treated under the same tax rules that apply to a traditional IRA.

The young adult could leave the money invested for retirement. The account could also be transferred to another traditional IRA, or some or all of it could potentially be converted to a Roth IRA.

That Roth conversion may sound particularly appealing. An 18-year-old may be in a relatively low tax bracket, and moving money to a Roth could provide decades of future tax-free growth if all of the Roth rules are eventually satisfied.

But there is an important catch. The conversion is not automatically tax-free. Some contributions create what the IRS calls “basis,” which simply means money that has already been taxed and generally should not be taxed again when it comes out of the account.

The $1,000 government contribution, certain government or charitable contributions, and qualifying employer contributions generally do not create basis, so those amounts would generally be taxable when converted to a Roth IRA. Investment earnings don’t create basis either and would generally be taxable as part of a conversion.

As a result, a Roth conversion could include both taxable and nontaxable amounts. The portion attributable to basis generally would not be taxed again, while earnings and amounts that did not create basis generally would be included in taxable income.

That makes good recordkeeping important. While the child is young, the custodian is expected to report the account’s basis. Once the child reaches the adult phase of the account, maintaining those records becomes the account owner’s responsibility.

I can imagine an 18-year-old being less interested in keeping decades of IRA tax records than we might be. This is one of those situations where diligent recordkeeping from the beginning could save a lot of trouble later.

This Is Primarily Retirement Money

Trump Accounts are intended to provide a head start on retirement savings, and that purpose is reflected in the rules.

During the growth period, withdrawals generally aren’t allowed. Investments are also restricted to qualifying low-cost mutual funds or ETFs that track indexes made up primarily of U.S. companies.

After the growth period, traditional IRA distribution rules generally apply. That means taking money out at a young age can result in taxable income and, unless an exception applies, an additional 10% early-distribution penalty on the taxable portion. That makes the account less flexible than some alternatives.

If your primary goal is college, a 529 plan may offer better tax treatment for qualified education expenses. If you want money available for a first car, an apartment deposit, a home purchase, or simply to help a young adult get established, another type of account, like a Uniform Transfers to Minors Act (UTMA) account, may give you more flexibility.

On the other hand, if the goal is specifically to create a retirement asset that (you hope) the child won’t touch for many decades, the lack of flexibility may actually be part of the appeal.

Opening One Is More Complicated Than You Might Expect

This may be the biggest practical surprise. Opening a regular IRA at Fidelity is pretty straightforward. You get an online application, provide some information, sign electronically, fund the account, and select your investments.

Opening the initial Trump Account involves several more steps.

First, an eligible adult must request that the government establish the child’s Trump Account by submitting IRS Form 4547, either by mail on paper or online through IRS.gov. More information about the process is available at TrumpAccounts.gov. After processing the request, the government provides instructions for activating the account.

BNY serves as the Treasury’s financial agent for the program, while Robinhood provides the brokerage services and serves as the initial trustee. Other financial institutions are expected to be able to accept Trump Account rollovers, but the initial account-opening process is centralized.

In other words, at least for now, you can’t simply call TABR and have us open a Trump Account at Fidelity the same way we would open an IRA. None of this makes the account unusable. It simply means families should expect a little more administrative work than they may be accustomed to.

Who Should Consider One?

I think Trump Accounts are most interesting for families with younger children or grandchildren, particularly those born in 2025, 2026, 2027, and 2028, who are eligible for the $1,000 government contribution.

A very young child has many years for additional contributions and, just as important, many decades for the investments to compound. Even relatively modest contributions could eventually become a meaningful long-term retirement asset.

For a child already close to age 18, I find the case less compelling. The special contribution window is short, the account-opening process is more cumbersome than a typical IRA, and other savings vehicles may provide more flexibility. And remember that all of your diligent planning could be thwarted if the child cashes out the account on their 18th birthday.

As with most planning strategies, I wouldn’t start with the question, “Is a Trump Account good?” I would start with, “What are we trying to accomplish with this money?”

If the answer is to begin building a retirement asset for a young child, Trump Accounts are worth considering. If the goal is education, helping with early-adult expenses, or maintaining control and flexibility, there may be better choices.

The rules are also very new, and I expect we will learn more as families, custodians, and the IRS work through the process. For now, I would view Trump Accounts as just another planning tool, more suited for younger children, rather than something every family needs to rush out and open.

You’re Invited to Our Office Open House

Last August, we moved into our new office space in the same building and mentioned that we hoped to host an open house once we were fully settled. It took us a little longer than expected, but we’re finally ready to celebrate and would love to have you join us.

Please save the date for our Office Open House on Wednesday, September 23, from 4:00–6:00 p.m. Stop by to see our new space and the views from our floor, enjoy some food and refreshments, and spend some time with the TABR team.

We’ll be sending a formal invitation with additional details and RSVP information soon. We hope to see you there!

Coming Soon: Your New Secure Client Portal

A few months ago, I introduced Advyzon, the technology platform we are implementing to improve both your online experience and several of our internal systems. We are now getting closer to the part you will actually see.

As we roll out the new client portal, which will be available on desktop and mobile devices, you’ll receive an email invitation to establish your secure online account. With one login, you’ll be able to view your accounts and quarterly reports, share documents, and securely communicate with our TABR team from either your computer or the mobile app.

When your invitation arrives, you’ll create a password. Your quarterly reports will be delivered directly through the portal, giving you one secure place to find them.

We’ll send more details as invitations go out. As with any technology change, we expect there may be a few questions along the way, and we’ll be available to help.

Social Security’s 2027 COLA Could Be Around 3.6%

We won’t know the official 2027 Social Security cost-of-living adjustment for another couple of months, but we are beginning to get a clearer picture.

Following the July inflation report, The Senior Citizens League lowered its estimate for the 2027 COLA to 3.6%. For comparison, Social Security benefits increased 2.8% in 2026.

I wouldn’t count on 3.6% just yet. The final adjustment is based on the average Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, during July, August, and September compared with the same period a year earlier. We have July’s number, but August and September still matter.

The Social Security Administration is expected to announce the official 2027 COLA on October 14.

One other point is worth remembering. A larger COLA is not necessarily good news by itself. It generally reflects higher prices. For retirees enrolled in Medicare, increases in Medicare premiums can also absorb some of the additional Social Security income.

We’ll know the actual number this fall and can incorporate it into our 2027 planning once it becomes official.

Portfolio Allocations

Since Bob Kargenian wrote our last monthly investment update on July 27, we’ve had one change in our tactical stock market models.

One of our stock market models went on a buy signal on August 18, so now four of our five stock market risk models are positive, and we are 80% invested. Our high-yield bond strategy remains on the buy signal it generated in April. As I’ve written before, we aren’t making these allocation decisions based on headlines or predictions about what markets “should” do next. We follow our models and make adjustments as the weight of the evidence changes.

We also received another new signal earlier this month. Our gold model moved to a buy signal on August 10, and we subsequently established a partial position in gold through the iShares Gold Trust (IAU).

IAU is designed to reflect the performance of the price of gold bullion. We view the position as a diversifier within the overall portfolio rather than a replacement for stocks or bonds.

Otherwise, there hasn’t been much to change. Sometimes the models move quickly and call for adjustments. At other times, the appropriate action is to leave things alone and wait for the evidence to change.

Closing Thoughts

There’s quite a bit in this month’s newsletter, from new accounts for children to Social Security adjustments. But whether it’s planning for retirement, navigating life’s transitions, or celebrating family milestones, thoughtful decisions always matter. On a personal note, my niece was married over the weekend, and we gathered as a family. These celebrations remind me that good planning is about more than numbers. It’s about what matters most to you and your loved ones.

As always, we appreciate your trust and confidence in all of us here at TABR. Please keep an eye out for our office open house invitation, and we hope to see you here in person on September 23.

Best regards,

Steven W. Medland, MBA, CFP^®

Partner

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