Good Afternoon,
I hope you and yours enjoyed a nice holiday weekend!
I am writing to share a quick update on the newly launched Trump Accounts since they may be worth considering for children and/or grandchildren in your family.
Trump Accounts are a new type of tax-advantaged investment account designed to give children an early start with long term investing.
Any child with a valid Social Security number, born between January 1, 2025 and December 31, 2028, is eligible to receive a $1,000 government contribution once a Trump account is established for them.
These accounts are not limited only to children born during that period. In general, a Trump Account can be established for any child under age 18 with a valid Social Security number. However, only children born within the 2025–2028 birth window are eligible for the $1,000 government contribution.
Current general rules allow up to $5,000 total per year in contributions to a child's Trump Account....not including the $1,000 government contribution. Family members, friends, and employers can make contributions on behalf of a child as well as other "authorized contributors."
The money in the account is intended for long-term growth and will generally be invested in low-cost U.S. stock index funds. The initial investment option is expected to be an S&P 500 index fund, with additional low-cost index fund options expected to become available over time.
For those who are interested, Trump Accounts can be opened through the official Trump Accounts website at TrumpAccounts.gov, the official Trump Accounts app, or through the IRS Online Account system. Parents, guardians, and other authorized individuals can start the process by submitting IRS Form 4547, the Trump Account Election form.
It is important to understand that Trump Accounts are not the same as 529 plans. A 529 plan is specifically designed for education expenses, while a Trump Account is structured more like a long-term retirement-style account for a child. In general, funds cannot be withdrawn before the year the child turns 18. After that, withdrawals may have tax consequences and potentially penalties depending on how and when the money is used.
For families with children or grandchildren born between 2025 and 2028, opening an account to claim the $1,000 government contribution may be worth considering. For older children or grandchildren, the decision is more planning-specific and should be weighed against existing college savings, family gifting goals, tax considerations, and the child’s overall financial picture.
As always, please reach out before making contributions if you would like help thinking through how this may fit into your broader planning.
Warmly,
Johanna