The New Child Savings Plan Parents Need to Know (530A / “Invest America”)
Congress has officially blessed us with yet another account type. This one is built for children and is commonly being called a “Trump Account” (also referred to as a Section 530A / “Invest America” account). The elevator pitch: it’s a tax-advantaged, long-term investment account for a minor, seeded (in some cases) with government money, and designed to push families toward early investing.
What It Is (In Plain English)
A Trump Account is essentially an IRA-style account for a child, with rules that heavily favor long-term investing. A parent or other authorized adult sets it up for the child, but the account is treated as belonging to the child.
The headline feature: the $1,000 “starter” deposit
For eligible children born from January 1, 2025 through December 31, 2028, the law creates a pilot program that provides a one-time $1,000 federal contribution, assuming the required election is properly made.
When Contributions Can Begin
Even though the account concept exists now, contributions generally aren’t accepted until July 4, 2026. So yes, you get to plan and wait. Humans love that.
Contribution limits (the part everyone cares about)
During the child’s minor years, the framework includes an annual contribution cap of $5,000 (with inflation indexing beginning after 2027). Employer contributions are also contemplated within the rules (and can be a nice perk if employers start matching, as some already plan to do).
Investment Restrictions: Simple, Cheap, and Boring (On Purpose)
Before the child turns 18, the money must be invested in eligible index-style mutual funds or ETFs tracking a qualified U.S.-equity index (think broad-market U.S. stock indexes). No leverage, and fees/expenses are capped at 0.10%. This is meant to keep the account low-cost and prevent “Uncle Larry’s Hot Options Strategy” from detonating a newborn’s future.
Withdrawals: Locked Up Until Adulthood
In general, no withdrawals before January 1 of the year the child turns 18. After that, the account is generally treated like a traditional IRA, meaning distributions can be taxable and the usual IRA-style rules begin to matter.
Practical Takeaways for Parents (And the Relatives Who “Want to Help”)
If your child is in the eligible birth window, getting the election right matters to capture the $1,000 seed deposit.
This is not automatically “better than a 529.” If your goal is education funding, a 529 may still be the cleaner tool in many cases, while this account is broader but more constrained early on.
Watch for employer participation. If companies treat this like a benefit, it could become meaningful fast.
Standard grown-up disclaimer: This is general information, not legal or tax advice for your specific situation.