Free money is officially up for grabs as Trump Accounts are now live.
President Trump hosted the heads of the New York Stock Exchange and Nasdaq in the Oval Office on Monday to mark the launch of the new accounts. While the site went up on July 4, the event was the official start.
The symbolism was not lost; the opening bell represented the start of a long-term wealth-building opportunity for future generations.
The accounts are a traditional IRA, tax-advantaged investment for kids under 18. Every US child born between January 1, 2025 and December 31, 2028 will receive $1,000 in an account owned by the child.
Funds will then be invested in a “diversified investment vehicle designed to maximize long-term growth,” according to the website. Additional investment options will be also added.
Each account is then administered by a parent or guardian who can add up to $5,000 per year. No withdrawals are allowed before 18 and come with income taxes.
“This is a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation. And they’ll really be getting a big jump on life,” President Trump said on the account’s website.
Who is eligible?
All US children under 18 with a valid Social Security Number qualify for the accounts.
The seed money comes directly from the Treasury Department with $1,000 allotted for each child born between January 1, 2025, and December 31, 2028. Families, friends and employers can all contribute up to $5,000 per year per child.
The Treasury Department — who is monitoring the program — rolled out the accounts on July 4 while banks and other financial institutions will be administering them.
The Bank of New York Mellon and Robinhood Markets are managing the initial accounts but they may be rolled over to other companies such as Vanguard.
To open an account, parents must fill out IRS Form 4547 which attaches directly to your tax return. You must also check the box to receive the $1,000 seed money.
Once the form is complete, folks can either submit the it right to the Trump Accounts app, through the IRS website called Individual Online Accounts or along with filing your taxes.
Investment options
According to the Treasury Department, each account is invested in the State Street SPDR Portfolio S&P 500 ETF, a low-cost exchange-traded fund that tracks the performance of the S&P 500 Index. The agency has also selected other low-cost index ETFs:
- iShares Core S&P 500 ETF (IVV)
- Vanguard Total Stock Market ETF (VTI)
- State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM)
- iShares Core S&P total U.S. Stock Market ETF (ITOT)
While parents, family and friends may contribute up to $5,000 to the accounts annually after-tax, businesses can also get into the game. Employers can contribute up to $2,500 for their employee or a dependent.
The administration said over 50 companies have committed to offer contributions for children of their employees — even if they aren’t eligible for the $1,000 from Treasury.
Trump Accounts or 529 plans?
Trump Accounts follow IRA-style rules, which means all earnings are tax-deferred, but withdrawals are taxed like income.
A 529 plan is a bit different and operated by a state or educational institution. These come with tax advantages and other incentives to make saving for college easier. It also helps with “post-secondary training, tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school for a designated beneficiary, such as a child or grandchild,” according to the IRS.
The advantage to a 529 is that the money earned grows tax-free as long as you use it to pay for qualified education expenses. Plus, these plans don’t impose an annual contribution limit. As mentioned, Trump Accounts are capped at $5,000 annually.
For 529s, families can contribute up to $19,000 per child — $38,000 for married couples — without filing a gift tax return.
It’s tough to say which account is better and it’s always important to speak with an expert. However, each are valuable for different reasons.
Trump Accounts are good for long-term wealth building as they act like a retirement account. According to TrumpAccounts.gov, by 27, an account could grow to about $15,000 and nearly $243,000 by 55.
But hey, you don’t even need to pick between the two. Families may open both accounts with the help of your state-sponsored education savings plan.
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