Trump account, 529 or custodial Roth IRA?

All three are US accounts that can hold money for a child, and a family can use more than one. They differ in who can pay in, what the money can be spent on and when it can come out. The rules below are as of 14 October 2026. Trump accounts have only taken contributions since 4 July 2026. Index funds and compound growth, which all three rely on, are covered in Investing 101.

The three accounts side by side

	Trump account	529 plan	Custodial Roth IRA
Who can have one	A child under 18 with a valid Social Security number	Anyone can be named as beneficiary	A child with earned income
Who runs it	A parent or guardian, after claiming it	The account owner (whoever opened it)	A parent as custodian, until the child takes over
Yearly limit, 2026	$5,000 from family, friends and employers combined	No yearly federal limit	$7,500, or the child’s earned income if less
Money from outside the family	$1,000 federal deposit for eligible children; employers up to $2,500 inside the limit	None from the federal government	None
Tax relief on money paid in	None	None federally	None
Tax on growth inside the account	None	None	None
When money can come out	From 1 January of the year the child turns 18	Any time	Any time
Tax when it comes out	Traditional IRA rules; growth, the $1,000 and employer money are taxed as income	None if spent on qualified education	None on contributions; earnings tax-free after 59½ and five years
Investments	S&P 500 or other US share index funds, fees of 0.10% or less	The plan’s menu	The provider’s menu

These are the federal rules; state income tax treatment of 529 plans varies by state. The sources are sections 530A and 529 of the Internal Revenue Code, IRS Publications 970, 590-A and 590-B, and IRS release IR-2025-117, all linked below.

Trump accounts, as the law sets them out

Trump accounts are a type of individual retirement account for children, created by Public Law 119-21 of 4 July 2025 and set out in section 530A of the Internal Revenue Code. “Trump account” is the name the law gives them.

Since 1 October 2026, every eligible child under 18 with a valid Social Security number has an account waiting, which Treasury said meant over 60 million more children with an account ready to claim. Someone has to claim it first. A parent or guardian does that in the Trump Accounts app, and until then family, friends and employers can’t pay in.

The federal government adds a one-time $1,000 for US-citizen children with a Social Security number born from 1 January 2025 to 31 December 2028 (IRS). It arrives only once the account is claimed or a parent has elected it on IRS Form 4547. Separately, Michael and Susan Dell pledged $6.25 billion to put $250 into the accounts of most children aged 10 and under who were born too early for the $1,000, NBC News reported on 2 December 2025. Children in ZIP codes where the median income is below $150,000 are first in line.

From 4 July 2026, family, friends and employers can add up to $5,000 a year in total per child, a limit that rises with inflation after 2027 (IRS). Employers can give up to $2,500 of that. It isn’t taxed as the employee’s income. The $1,000 federal deposit and qualified general contributions (money from a government or charity for a defined group of children) don’t count toward the $5,000.

How Trump account money is invested and taxed

Until the year the child turns 18, the money can only go into mutual funds or ETFs that track the S&P 500 or another index of mainly US shares. Those funds can’t use leverage, and their annual fees can’t exceed 0.1% of the balance. At launch, every contribution went into State Street’s SPDR Portfolio S&P 500 ETF, and Treasury said on 1 July 2026 that four more index ETFs would become choices in the coming months.

Money can’t come out before 1 January of the year the child turns 18, apart from rollovers and a few other exceptions. From then on the account generally follows the rules for traditional IRAs. Contributions aren’t deductible. The law counts family contributions as basis (money already taxed), so that part isn’t taxed again when it comes out. The growth, the $1,000 federal deposit, employer money and any government or charity money are taxed as income. Under traditional IRA rules, withdrawals before 59½ also owe a 10% additional tax unless an exception applies, and IRS Publication 590-B lists higher education expenses and a first home among the exceptions.

529 plans, and what the 2025 law changed

A 529 plan is an education savings account named after section 529 of the tax code. Contributions aren’t federally deductible, growth isn’t taxed, and withdrawals are tax-free when spent on qualified education (IRS); state income tax treatment varies by state. The account belongs to whoever opened it. The IRS says the buyer controls the funds until they’re withdrawn and can switch the beneficiary to another family member with no tax consequences.

College costs that count include tuition, fees, books, supplies and equipment, a computer and internet access, and room and board for students enrolled at least half-time (section 529). Up to $10,000 over the beneficiary’s lifetime can repay their student loans.

Public Law 119-21 widened two parts of the list. For school before college (kindergarten to 12th grade), the yearly limit rose from $10,000 to $20,000 for tax years starting after 31 December 2025. The costs that count grew from tuition alone to include curriculum materials, books, online materials, tutoring by a qualified tutor who isn’t a relative, standardized test fees, dual-enrollment fees and educational therapies for students with disabilities. Costs of recognized postsecondary credential programs (tuition, fees, books, testing and continuing education) now count too. Both wider lists apply to money withdrawn after 4 July 2025.

Money spent on anything else pays income tax on its growth plus a 10% additional tax. The exceptions to the 10% include the beneficiary’s death or disability and tax-free scholarships, up to the scholarship’s amount (IRS Publication 970). Gift tax can apply too. Contributions above $19,000 from one person to one beneficiary in a year may have gift tax consequences.

Since 2024, leftover 529 money can also move into a Roth IRA for the beneficiary, under the SECURE 2.0 Act (section 529(c)(3)(E); IRS Publication 590-A). The conditions:

• the 529 has been open for more than 15 years
• money paid in during the last five years, and its growth, can’t move
• the money goes directly from the 529 to the beneficiary’s Roth IRA
• each year’s transfer counts toward that year’s Roth IRA limit ($7,500 in 2026, less any other IRA contributions), which can’t exceed the beneficiary’s earned income
• the lifetime total is $35,000

At 2026’s limit, moving the full $35,000 takes at least five years: four years at $7,500 is $30,000, and the last $5,000 needs a fifth.

Custodial Roth IRAs

A custodial Roth IRA is an ordinary Roth IRA opened for a child, with a parent as custodian. The child needs earned income. Wages, tips, commissions and self-employment income count; interest and dividends don’t (IRS Publication 590-A). The 2026 limit is $7,500 or the child’s earned income for the year, whichever is less (IRS), so a 15-year-old who earns $3,000 from a part-time job can put in up to $3,000.

Contributions aren’t deductible, and growth isn’t taxed. Contributions can come out at any time with no tax, because Roth withdrawals count as contributions first (IRS Publication 590-B). Earnings come out tax-free once five years have passed since the first contribution and the owner is 59½ or older, disabled, or buying a first home (up to $10,000). The same applies to heirs after the owner’s death. Earnings taken out earlier are taxed and owe a 10% additional tax unless an exception applies, and qualified higher education expenses are one of them.

The custodian runs the account until the child is an adult under their state’s law; Fidelity, one provider, says the handover is typically between 18 and 25, depending on the state. The earnings test is the real limit. In a year when the child earns nothing, nobody can pay in.

How $1,000 a year could grow in a Trump account

The figures below show the arithmetic; nobody knows what the fund will return. Say a family puts $1,000 into a Trump account at the start of each year for 18 years, the fund returns 6% a year before fees, and the fee is the legal maximum of 0.10%. The return after the fee is 1.06 × 0.999 − 1 = 5.894% a year. With the same maths as our compound interest calculator:

• The $18,000 the family pays in grows to about $32,400, of which about $14,400 is growth.
• Add the $1,000 federal deposit at the start and the total is about $35,200.
• The $1,000 deposit on its own grows to about $2,800.
• At 2% inflation a year, $35,200 in 18 years would buy what about $24,600 buys now.
• On the family’s $1,000 a year, the 0.10% fee costs about $360 over the 18 years compared with no fee; a 1% fee would cost about $3,400.

$0$20K$40K$60K

0369121518

• 8% a year before fees: $43,908
• 6% a year before fees: $35,204
• 4% a year before fees: $28,381

Balance at the end of each year. Family deposits of $1,000 at the start of each year and the $1,000 federal deposit at the start, growing at 4%, 6% or 8% a year compounded yearly, less the 0.10% fee. Before tax and inflation. An illustration only: real returns vary from year to year and can be negative. Source: Scroll calculation.

The Trump account calculator gives the same $35,204 for a child born in 2027 with these inputs. For a child born in 2026 it gives $35,044, because contributions only opened on 4 July 2026 while the growth period still ends on 1 January 2044.

Put the same $1,000 a year into a 529 with the same return and fee, and it reaches the same $32,400 (a 529 gets no federal deposit). The difference is the tax when the money is spent. Spent on qualified education, the 529’s $14,400 of growth is tax-free. From a Trump account the growth is taxed as income when it’s withdrawn, though the family’s $18,000 isn’t taxed again and higher education spending escapes the 10% additional tax. A custodial Roth IRA could take the same $1,000 only in years when the child earned at least that much, which rules out the early ones; its growth could then come out tax-free in retirement.

Scroll is education, not advice. Our lessons and calculators explain how money works in general. They don’t know your circumstances, so they can’t tell you what to do with yours. For that, speak to a qualified, regulated adviser in your country.

If the child has no earned income, the choice is between a 529 and a Trump account. The tax rows in the table show what each costs if the money goes on education, and if it doesn’t.

Drafted with AI assistance. Every figure was checked against the sources listed, on 14 October 2026.