A new vehicle for saving for retirement or education was included in last year’s One Big Beautiful Bill Act. It is officially the 530A account, also known as the Trump account. The start date for this type of account was July 4, 2026.
Here are the basics that parents and grandparents need t know about these accounts:
The federal government is providing a seed deposit of $1,000 for children born during the years 2025 through 2028. To be eligible for this deposit, the child must be a US citizen and have a valid Social Security number. Children born before January 1, 2025 can still have an account but they do not receive the one-time $1,000 deposit from the Federal Government. The account must be opened before the child turns 18.
- The tech billionaire Michael Dell and his wife Susan will contribute, through their philanthropic organization, an additional $250 to each of the first 25 million children who enroll. To be eligible for a Dell gift, the children need to have been born in 2016 through 2024 and live in a ZIP code where the median household income is below $150,000, which covers most of the US. Other philanthropists have pledged to make deposits of their own. In addition, many large companies have pledged to match the federal deposit for their employees’ qualifying children. Source: ZeroHedge.com/Personal Finance
Parents or guardians get the $1,000 by submitting IRS Form 4547. This can be done via the Trump Accounts mobile app, at trumpaccounts.gov, through an IRS Individual Online Account, or when filing taxes. The mobile app and the website, after explaining how the program works, will steer you to the IRS site since form 4547 is a tax form. To use the IRS site, you must have an ID.me account set up. Once the Treasury confirms the account is active, it deposits the $1,000. There must be an open 530 A account to receive the funds; it is not done automatically.
After the account is set up, anyone can contribute up to a combined maximum of $5,000 per year per child. The contribution is in after-tax dollars, like contributions to a Roth account.
The $1,000 deposited by the federal government and amounts given by qualifying charities or other levels of government does not count toward the $5,000 cap.
Earnings grow federal tax-deferred but may be taxable at the state level. This is still a work in progress in many states.
Contributions to the account must stop the year before the child turns 18. The funds cannot be withdrawn before the child’s 18th birthday, with some very limited exceptions like excess contributions.
The seed money from the government is invested in an ultra-low-cost index fund. There are a limited number of other low-cost funds that 530 A owners can invest in.
On January 1 of the year the child turns 18, the account becomes a traditional IRA, with withdrawals taxed as ordinary income even if the funds are used for education. If the withdrawals are used for education or to purchase a first home, there will not be a penalty for early withdrawals. Note: The after-tax contributions by an individual are withdrawn tax free, but withdrawals of deposits made by the government, employers and other organizations are subject to ordinary income taxes. Earnings grow tax deferred until withdrawn.
The 530 A is not a substitute for a 529 account. Withdrawals for qualified education expenses from a 529 are tax free. As stated above, withdrawals from the 530 A are taxed at ordinary income rates. In addition, the withdrawals from the 530 A will count as income, which impacts eligibility for financial aid.
Funds in a 529 account can be used for any level of education, starting with kindergarten.
In addition, the leftover money in a 529 account – up to $7500 per year, up to a total of $35,000- can be rolled into a Roth account tax free.
The Trump accounts are designed to give a jump-start to retirement savings for all income levels. The $1,000 initial deposit can be likened to an employer match on a 401k – free money. It is also a great way to teach your children or grandchildren about the benefits of investing over the long-term.
If you have any questions about investing for education or retirement, please feel free to call (215-836-4880) or email the office (ellend@regardingyourmoney.com) to set up an appointment.
Or, visit us at www.regardingyourmoney.com
Sources: ZeroHedge.com/Personal Finance, New York Times