Trump Accounts officially launch July 4, but what are they exactly and how do they work?
In this short video, we highlight the key facts families should know about this new savings vehicle for children.
For a deeper dive, view our comprehensive FAQ guide here for answers to the most common questions we’ve been hearing.
Transcript:
Trump Accounts launch July 4th, and many families are curious what they are and how they actually work.
What is a Trump Account?
A Trump account is a new tax-advantaged savings and investment account for children under the age of 18 designed to encourage long-term savings from an early age.
How much can you contribute?
Children born in the U.S. during the eligible enrollment period can qualify to receive a one-time federal contribution to open the account.
Contributions can then be made by family members, friends and employers up to a $5,000 annual contribution limit. These contributions are made with after-tax dollars and do not create taxable income for the child.
How are Trump Accounts invested?
Money can then grow through eligible investments over time. Generally, these investments are low-cost, diversified U.S. stock index funds or similar qualifying investments, making the accounts easy to manage while providing long-term growth potential.
What is the Post-Growth Period?
After the growth period, which ends on December 31st of the year before the child reaches age 18, the account is essentially treated as a traditional IRA, where withdrawals are generally taxable as ordinary income and withdrawals made before age 59.5 may be subject to a 10% early distribution penalty unless an IRA exception applies.
As the program continues to develop, make sure you review the latest IRS guidance and eligibility requirements before opening or contributing to a Trump Account.
As always, if you have any questions, feel free to reach out to us.
