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A $1,000 federal seed at birth, up to $5,000 a year in contributions, and 65 years of compounding: a Trump Account (IRC Section 530A, created by the One Big Beautiful Bill Act) can plausibly reach seven figures by retirement. What the pitch usually skips is that almost none of it is tax-free. Set your contribution plan and expected return, and this calculator projects the balance at 18 and 65, then splits it into tax-free basis and taxable growth so you see the real after-tax outcome.
What a Section 530A account actually is
It is a tax-deferred investment account for a child under 18, invested in low-cost equity index funds, that automatically converts to a Traditional IRA in the child's name at 18. No earned income is required, which is exactly what separates it from a custodial Roth IRA and makes it available to any family from birth.
Claiming the $1,000 seed
The one-time federal deposit applies only to children born between January 1, 2025 and December 31, 2028, and it has to be actively elected when the account is set up, it does not arrive automatically. Miss the election and the account still works; you just start from zero.
What the numbers actually mean for you
Eighteen locked years, then a lifetime of compounding
The defining feature is the lock: no withdrawals, no loans, no hardship exceptions before 18. That sounds harsh until you see what it protects. The first $110,000 built during childhood is the engine for everything after, and the lock guarantees nobody can raid it.
The second act is bigger than the first. Even if contributions stop dead at 18, the balance multiplies roughly 30-fold by 65 at 7.5%. The account's real product is the 65-year runway, far more than the $5,000-a-year limit.
The basis trap: this is not a Roth
Marketing has framed these accounts as tax-free wealth for kids. The statute says otherwise: it is a tax-DEFERRED account with a basis carve-out. Family contributions come back untaxed; the federal seed, employer money, and all growth are ordinary income when withdrawn.
After 65 years of compounding, basis is a rounding error. In the Parkers' case $54,000 of a $3.3 million balance, under 2%, escapes tax. Anyone comparing this against a custodial Roth IRA for a teenager with earned income needs that number in front of them before choosing.
Getting the mechanics right from day one
Three rules do most of the damage when missed. The $5,000 annual cap counts every source combined, and excess contributions attract a 6% excise tax each year they stay in. The $1,000 seed is only for births from 2025 through 2028 and must actually be claimed, it is not automatic money that finds you. And during the minority, the funds must sit in qualifying low-cost index funds, so there is no stock-picking lever to pull.
For families whose employers offer the match: take it, but know the trade. A $2,500 employer contribution is free money excluded from your income, yet it crowds out $2,500 of your own basis-building room under the shared cap, slightly worsening the eventual tax split.
College aid: the 20% problem
Because the account belongs to the child, FAFSA treats it as a student asset, assessed at up to 20% when aid is calculated, against roughly 5.6% for a parent-owned 529. A $110,000 balance at 18 can shave more than $20,000 a year off need-based aid eligibility.
The clean division of labour: 529 first for education money (parent-owned, tax-free for qualified costs, gentle on aid), Trump Account for retirement-horizon money the child must not touch anyway. Using the locked account as a college fund gets you the worst of both: heavy aid assessment on money you cannot even withdraw for tuition before 18.
Born outside the 2025-2028 window? Here is the ranking
Without the $1,000 seed, the account is still open to any child under 18, but its edge shrinks and the pecking order changes. A teenager with real earned income from a job is usually better served by a custodial Roth IRA: identical lock-up discipline, but every dollar of growth comes out tax-free instead of taxed as ordinary income.
For younger children with no earnings, the choice is genuinely between this account and a taxable brokerage account in the parent's name. The Trump Account wins on forced discipline and deferral; the brokerage wins on flexibility and long-term capital-gains rates. Families confident they will not raid the money often end up preferring the flexibility.
What actually happens at 18
On the child's 18th birthday the account converts to a Traditional IRA in their name and control passes to them completely. The growth lock lifts, and the normal IRA rulebook takes over: withdrawals before 59 and a half generally trigger income tax plus a 10% early-withdrawal penalty, with the usual carve-outs for a first home, qualified education, or disability.
That handover is the real behavioural risk, not the tax drag. A newly-minted adult with six figures and full access is one impulsive decision away from a taxable liquidation and a penalty. The families who get the most out of these accounts treat 18 as the start of a conversation about leaving it alone, not the finish line, because the 47 years of compounding after 18 are where the entire outcome lives.
How the growth and basis math works
A Trump Account (IRC Section 530A, created by the One Big Beautiful Bill Act) compounds three streams: the one-time $1,000 federal seed for children born 2025-2028, family contributions, and employer contributions, together capped at $5,000 a year.
The second half of the formula is the part everyone misses. Only the family's own after-tax contributions create tax-free basis. The seed, any employer money, and every dollar of growth are tax-DEFERRED, not tax-free: they get taxed as ordinary income on the way out, decades from now.
Calculation Steps:
- Set the child's birth year: born 2025 through 2028 qualifies for the $1,000 federal seed; outside that window the account works but starts at zero.
- Set annual contributions: family plus employer combined cannot exceed $5,000, and employer money (excludable up to $2,500) does not create basis.
- The calculator compounds everything at your chosen return until age 18, when the account converts to a Traditional IRA in the child's name.
- It then keeps compounding to your chosen retirement age and splits the final balance into tax-free basis and the taxable remainder.
Worked example
The Parkers' daughter is born in 2026. They claim the $1,000 seed and contribute $3,000 a year until she turns 18, with no employer money.
Their basis is $3,000 x 18 = $54,000. At a steady 7.5% return, the account reaches roughly $110,700 on her 18th birthday: seed and growth make up the other $56,700.
Nothing more is ever added. Left compounding at 7.5% inside the converted IRA, the balance reaches roughly $3.3 million at age 65.
At withdrawal, only the $54,000 basis comes out tax-free. Around $3.25 million is taxed as ordinary income; at a 15% retirement rate that is a bill near $490,000, leaving about $2.8 million net. Still an enormous outcome, but nothing like the 'tax-free millions' pitch.
Input definitions
Review the glossary of terms used in the calculation model below. Click on highlighted links to read more in-depth definitions in our financial glossary:
| Parameter | Definition & Context |
|---|---|
| Child Birth Year | Determines seed eligibility: only children born 2025 through 2028 get the $1,000 federal deposit. Later birth years can still open the account. |
| Annual Family Contribution | After-tax money from parents or relatives. This is the only stream that builds tax-free basis, capped at $5,000 minus any employer contribution. |
| Employer Contribution | Up to $2,500 a year an employer can add without it counting as the parent's taxable income. It consumes part of the $5,000 cap and does not create basis. |
| Expected Annual Return | The assumed market return. Accounts must sit in broad, low-cost equity index funds (expense ratios capped at 0.10%) during the child's minority. |
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