There's a new savings option making headlines—and it could play a role in helping the next generation get a financial head start. Known as Trump Accounts, these newly created investment accounts are designed to encourage long-term saving for children while offering families another tool to build wealth over time.
As
with any new financial program, it's important to understand how it works before deciding whether it's a good fit. In this article, we'll walk through the basics, including who qualifies, how the accounts are funded, and the key rules to know. Our goal is simple: to help you understand the facts so you can make informed financial decisions with confidence.
Who is eligible?
Any U.S. citizen
that is under the age of 18 AND has a valid Social Security card is eligible to establish a Trump account.
For those born January 1, 2025-December 31, 2028, establishing a Trump account will make them eligible for a one-time federal deposit of $1,000 into the account.
For those born between 2016-2024 who do not qualify for the initial $1,000, they could be eligible for a one-time federal deposit of $250 if they live in a ZIP code where the
median income is $150,000 or less.
When can the money be withdrawn?
Any money in the account can be withdrawn once the beneficiary turns 18 years old but does not need to be. The account grows as the beneficiary does, and there is no age when the money is required to be depleted.
Contributions and Investment
Contributions to the account are generally made with after-tax dollars and invested in a vehicle with the goal of maximizing long-term growth while minimizing risk. The purpose of the accounts is to provide the beneficiary with safe and secure cash when they turn 18, so the number of investment options is limited. Low-cost and diversified index funds and ETFs are generally the allowable investment vehicles.
Families, friends, and employers may contribute to the account, but contributions are limited to $5,000 per year.
What about taxes?
Trump accounts are funded with after-tax dollars so that the money can grow tax-deferred while in the account. Once the beneficiary turns 18, withdrawals from the account are taxed like those from traditional IRAs. Meaning
withdrawals are taxed as ordinary income.
Employers can get in on the action as well. Employers can contribute to Trump accounts managed by their employees up to $2,500 per year per account. All donations are tax-deductible.
Final Thoughts
Trump Accounts represent another option for families looking to invest in a child's future, but like any financial tool,
they're most effective when they fit within a well-thought-out financial plan. Understanding the contribution rules, investment options, and long-term implications can help you determine whether these accounts align with your family's goals.
If you have questions about how a Trump Account may fit into your overall financial strategy, we're here to help. As always, feel free to reach out to our team to discuss your situation or explore other savings and investment
opportunities that may be right for you.
Need help? Contact us anytime—we’re here for you!
