Trump Accounts Are Coming. Now What?
Key take-aways:
- Ownership Structure: Trump Accounts are owned by the child, similar to a 529 college savings plan, emphasizing that they are primarily for retirement, not for college or home purchases.
- Account Features: These accounts are structured like traditional IRA accounts, with money growing tax-free, but withdrawals are (mostly) taxed as income.
- Contribution Limits: Up to $5,000 can be contributed per year by parents, guardians or others, employers may contribute up to $2,500 (this counts against the $5,000 cap).
- Incentives: Children born from 2025 to December 31, 2028, receive an extra $1,000 from the government, which does not count toward the contribution limit to Trump Accounts.
- Investment Restrictions: Funds in Trump Accounts must be invested in low-cost index-based mutual funds or ETFs, with limits on leverage and expense ratios.
- Long-Term Commitment: The Trump Accounts are intended for long-term retirement savings, with withdrawals not expected until well into adulthood.
Trump Accounts Are Coming – Links:
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Link to Morningstar Article: 10 Things to Know About the Trump Savings Account
Trump Accounts Are Coming
Timestamps:
00:01 Accurate information?
00:46 Who OWNS the Trump Accounts?
01:29 How is the Trump Accounts STRUCTURED?
02:05 CONTRIBUTIONS to Trump Savings Accounts
03:40 How is the money INVESTED?
04:30 This IS a retirement account!
Trump Accounts Are Coming – Now What?
Transcript
We’re starting to see information, showing up online, about Trump accounts.
And we wanted to put together a short video to talk about it.
We want to stress to folks that, as we were preparing to put this video together, we started finding a lot of information online that was NOT accurate. The one thing that they all have in common is these articles were published in April, May, June, before the bill was signed into law.
Be very careful when you’re referring to information online about Trump Accounts. If it was published before July 4th, 2025, when the bill was put into law, it MIGHT not be accurate.
Regarding the Trump accounts, we want to talk about a couple of key points that are coming up in conversations with people.
The first one that we are asked is, “who owns the Trump accounts?” I mean, you know, parents are putting money in for these kids. Don’t the parents own it?
Technically, this works… the ownership works a lot like a 529 plan for college.
So with Trump accounts, the child is the owner of the account.
The child is listed as the beneficiary on the account. So it works like a 529.
But make no mistake, Trump accounts are not designed to cover college expenses, or first time home purchases. A Trump savings account is a retirement account for a young person.
The second question that we’re asked often about Trump accounts is “How are these accounts structured?”
Well, I’ll give you a hint. They look a lot like a traditional IRA account, an individual retirement account.
Remember, these are designed for retirement. So they’re going to work in pretty much the same vein.
You don’t get a tax deduction when the money goes in, but the earnings grow without taxes.
When you do take the money out, it’s going to be taxable income to you… to the child, when they do take the money out.
The third question that we’re asked is “How can we contribute to, or… Who can contribute to Trump accounts, and how much can we put in?”
You can put away up to $5,000 per year in a Trump savings account.
That money can come from the parents, the guardians, other adults.
So you can put up to $5,000 per year for a child. There’s also some other wrinkles to this. An employer can put up to $2,500 per year if they have a young employee under the age of 18. They can put money into one of these Trump accounts.
An employer can also put money away for the dependent child of an employee into a Trump savings account.
But keep in mind the $2,500 that the employer can put in, on behalf of a child OR a dependent child of an employee… that counts against the $5,000 annual cap.
There is one other wrinkle with the one big, beautiful bill being enacted in 2025:
If you have a child that has been born in 2025 and up through December 31st, 2028; in these four years, if you have a child born, the government will give you an extra one-thousand dollars, kind of as a starter amount to this account.
And that extra thousand dollars that you get from the government, does not apply towards the $5,000 cap.
Another question that we’re asked is “how does the money get invested in the Trump accounts?”
This is something I actually like. The money in the account can only be invested in either exchange traded funds or mutual funds that invest in an index. So like the S&P 500, for example.
There are a few other wrinkles to this.
You can’t have leverage in the account. So you can’t go on margin and you can’t own leveraged products in the account.
So you can’t buy a leveraged S&P 500 fund, or a leveraged NASDAQ fund.
The other stipulation is that the annual expenses for the exchange traded fund, or the mutual fund cannot exceed 10 basis points. That’s one 10th of 1%.
The main point that we want to stress to folks is you may have heard the Trump accounts are going to be ways to put extra money away for college, or for first time home buyer.
Keep in mind, these Trump savings accounts are retirement accounts for young people. For young kids.
The money has to go in prior to age 18 and the money really can’t come out for a very, very long period of time.
We’re probably going to see more questions and more topics come up about these Trump accounts.
And so it wouldn’t surprise me if we put together a part two, on Trump savings accounts.
If we do, we’ll link to it up here somewhere.
But thanks for watching and we’ll catch you on the next one.
