Advisors weigh Trump Accounts for children’s saving

At a Vanguard webinar titled ‘Trump Accounts: What You Need to Know’, four panelists outlined rules and planning uses for 530A accounts. The panel included Joel Dickson, principal and global head of advised strategies at Vanguard; Melissa Elbert, partner at Aon Wealth Solutions; Kathryn Larkin, head of global benefits at Vanguard; and Fiona Greig, principal and global head of investor research and policy at Vanguard.

Trump Accounts, formally 530A accounts, are investment accounts for children under 18. They accept after-tax contributions from multiple sources up to $5,000 a year across all contributors. The accounts do not require the child to have earned income and contributor income limits do not apply. Accounts convert automatically to a Traditional IRA at age 18.

Eligible newborns born between 2025 and 2028 will receive a one-time $1,000 federal seed contribution. The panel noted that the $1,000 seed and gifts from charities do not count toward the $5,000 annual cap.

Panelists noted that older children and teenagers can benefit from long compounding horizons. Joel Dickson described opening a Trump Account as a ‘no-regrets decision’ when employer or government contributions are available.

Panelists urged that Trump Accounts be used alongside other savings vehicles. They noted that families focused on paying for college may still prefer 529 plans because of education-specific tax treatment, while Trump Accounts support broader long-term accumulation and retirement saving.

The panel discussed employer roles in funding. Melissa Elbert and Kathryn Larkin outlined possible methods including direct employer contributions, matching contributions, or treating employee pre-tax deferrals as employer contributions. The panel noted those mechanisms can allow up to $2,500 a year in employer-related contributions per eligible employee child to be excluded from the employee’s taxable wages. Panelists said advisors should monitor forthcoming IRS guidance on employer implementation.

The Treasury set an initial investment lineup of five broad-market, low-cost equity ETFs. State Street’s SPDR Portfolio S&P 500 ETF (SPYM) will serve as the default for new contributions until account holders can make active selections. After selection is enabled, families can choose SPYM (0.02% expense ratio), iShares Core S&P 500 ETF (IVV, 0.03%), State Street SPDR Portfolio S&P 1500 ETF (SPTM, 0.03%), Vanguard Total Stock Market ETF (VTI, 0.03%) and iShares Core S&P Total U.S. Stock Market ETF (ITOT, 0.03%). The panel noted the funds track the S&P 500 or broad U.S. stock market.

Panelists cautioned against relying on Trump Accounts as the only savings vehicle for a child and recommended tracking regulatory updates and preparing client materials that explain how the accounts fit into family savings strategies.