Trump Accounts and the Million-dollar Strategy You’re Overlooking

There’s a new kid on the block when it comes to financial planning: the Trump Account, or more technically – the 530A account. These ‘starter retirement accounts’ went live last month and there’s plenty of misunderstanding out there about how they’re most effectively used. Let’s dig into it!

Disclaimer

First off, let’s get some things straight. This is not Trump Accounts 101. If you don’t know the basics of how these accounts work, when contributions are allowed, when withdrawals are allowed and their tax consequences, you should start instead with XML’s Guide on these new accounts. Related, these are brand new, and guidance and tax laws can change. Please note that this being written as of August 2026.

Next, whether or not the strategy discussed herein should be employed is a personal decision based on your own family’s financial planning goals, progress, and circumstances. This is certainly not a universal recommendation to use this strategy, particularly if you don’t already have higher-priority goals (like your own retirement) on track. 

Lastly, there’s a lot of nuances, rules, exceptions and technicalities when it comes to these accounts, this strategy, and frankly all investments. It would make for a very boring read if I had to footnote and explain everything. Speak with your financial advisor or contact me if you’d like to go into the nitty gritty on this. See additional disclosures at the end of this article.

The Power Play

There’s an old adage “it’s not timing the market, it’s time in the market,” and it highlights one of the greatest components of investing: compounding returns. The longer your money is invested and growing, the greater the accumulation. Think about rolling a snowball down the mountain starting at the top of Mount Everest versus starting it at Base Camp. One snowball is going to be bigger – a lot bigger.

Trump Accounts launched this summer and offer an even bigger snowball opportunity. They allow parents (or other family members) to jump-start tax-advantaged retirement savings for their children as early as birth. Whereas most retirement savings is predicated upon earning income – i.e., adulthood – this is during childhood. As in, the Mount Everest snowball.

As the child grows, you continue to add money to the account; the current maximum is $5,000 and will start indexing with inflation in 2028 onward. That’s $5,000 each year to contribute towards this starter retirement account. Do that all 18 years of the childhood, and that’s $90,000 of contributions – plus earnings because the account is invested in a broad-based U.S. Equity index fund, like the S&P 500 index. Not to mention the extra $1,000 if your child is born in the years 2025-2028 – just a little extra cherry on top.

Now – here’s the real play. While the earnings grow in a tax-deferred way, they ultimately get taxed upon withdrawal, following normal IRA rules. So the real power strategy is to get the money converted into a Roth IRA where the money can then grow tax-free to and through retirement. And the sooner you convert, the better. And that means looking for an early adulthood window when earnings are low and the Kiddie Tax no longer applies.

The Math

Not everyone loves doing Future Value calculations like me. So let me go ahead and do it for you in the hypothetical situation below –  feel free to check my math.

If you have a child, Olivia, born this year, you’ll get the $1,000 pilot program contribution. Let’s say you also contribute the annual $5,000 (and for the math purposes, we’re going to pretend this limit doesn’t ever go up).  So that’s $1,000 + $90,000 contributions by the time Olivia turns 18, when the account is treated as a Traditional IRA for Olivia.

The contributions are invested in the S&P 500 fund, which has averaged 9-11% annualized over the past 20 years according to Fidelity. Let’s be even more conservative and suggest a 7% net annualized rate of return for the investments.

Olivia goes to college – which you have adequately and separately planned for – and maybe even some graduate school. She becomes financially independent when she’s 24 and starting her first job and she’s no longer subject to the Kiddie Tax. 

That starter retirement account?  It’s now worth roughly $278,000. 

Being the planners that you are, you help Olivia convert this account to a Roth IRA, covering the taxes owed on the conversion, which will be at a lower tax bracket since it’s theoretically Olivia’s lowest starting salary year. The account remains invested and continues to grow until Olivia is 59 ½, and it’s now just over $3 million. Olivia’s generation will live easily into their hundreds, so she doesn’t even think about retiring until she’s 70, when the account is now over $6.2 million.

Let’s review: $90,000 in contributions 🡪 Roth conversion 🡪 $6.2 in million tax-free retirement money

That’s a big snowball. 

Want to talk about this opportunity with your family’s financial plan? Reach out to me lobrien@xmlfg.com so we can discuss further.

This communication is for informational and educational purposes only. No content or reference is intended to be a recommendation for the sale or investment in any product, strategy or service nor should it be perceived as individual advice. Please seek the advice of a financial advisor regarding your particular financial situation.XML Financial Group and its Wealth Advisors are not licensed tax or legal professionals. These materials are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws.  Individuals should consult their personal tax or legal professional regarding tax filings, such that may be required for certain trusts, retirement and ERISA plans, and any tax- or legal-related investment decisions. The information contained herein is based on general terms and is intended to be used for illustration purposes only. There is no guarantee that the figures presented will be obtainable or that the rates presented are available or achievable.  There are other factors that contribute to the expected outcome of any investment strategy, such as interest rate movement, market risk, securities selected, reinvestment risk, and other economic factors.Visit xmlfg.com for more information.

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