A growing number of employers are jumping on the bandwagon for Trump Accounts. Here’s everything you need to know about opening one.
Who are Trump Accounts for?
Trump Accounts are for parents and guardians who want to save money for their kids’ educations – or for them to start a business or make a down payment on a home after they turn 18.
Anyone with a kid 18 or younger who is a US citizen with a Social Security number can open a Trump Account. The federal government will contribute $1,000 in seed money per account – but only for kids born from Jan. 1, 2025, to Dec. 31, 2028.
What do Trump Accounts do?
Parents, family members and friends can contribute up to $5,000 total per year to a Trump Account. Half of that can come from pre-tax income. Any contributions from the government or charities don’t count toward the $5,000.
The annual contribution caps will rise in keeping with inflation.
Employers can contribute up to $2,500 per year for the kid of an employee or of an employee’s dependent — that counts toward the $5,000 annual cap, but won’t be considered taxable income. Employers can also let workers direct up to $2,500 of their pre-tax salaries to Trump Accounts.
“It’s gonna be very similar to a 401K match in the sense that this is just free money,” Nathan Goldman, a member of the American Accounting Association and professor at North Carolina State University, told The Post.
Funds in the accounts can only be invested in low-cost mutual funds or exchange-traded funds, also known as ETFs, which mostly consist of US stocks and bonds.
The website www.trumpaccounts.gov estimates that investing $250 per year in an account opened at birth will yield $20,700 by the time the youth is 18. Annual investments of $5,000 are estimated to yield $303,800 by that age, according to the site.
Funds can’t be withdrawn until the beneficiary turns 18, though there are penalties if the money goes toward expenses other than the ones for which the accounts were designed.
How do taxes work with Trump Accounts?
Taxes depend on a host of details. If the beneficiary withdraws the funds at age 18 or older for higher education, the withdrawal and and any earnings get treated like income tax.
Similar to an IRA, if the money is taken out before the beneficiary turns 59 and a half for something other than education, starting a business or making a down payment on a first-time home, there are different kinds of penalties.
For instance, if a person takes out funds to buy a car after turning 18, they face a 10% penalty.
But from age 59 and a half onwards, the money can be withdrawn for things other than the intended purposes of Trump Accounts with no penalty – but with income tax still required.
Where do the Trump Accounts come from?
Trump Accounts were established in last year’s One Big Beautiful Bill Act — President Trump’s signature second-term legislation — which aimed to make it easy for major corporations and philanthropists to contribute to those accounts on a large scale.
How do Trump Accounts compare with traditional savings accounts?
Trump Accounts do not have the same tax advantages as 529 accounts, which are deferred savings plans designed to help pay for college expenses, or Roth IRAs, retirement plans that enable tax-free withdrawals, experts told The Post.
Unlike those plans, withdrawals from Trump Accounts are not tax-free and the savings must be invested in low-cost index funds.
Still, parents may want to diversify their savings with Trump Accounts – for example, putting 75% of savings in a 529 and keeping 25% in a Trump Account, Goldman said.
How do you open a Trump Account?
You can fill out a new IRS form, known as Form 4547, and attach it to your tax return. There’s a box you can fill in to elect to receive the $1,000 seed money.
Starting around the middle of this year, you’ll also be able to open an account at www.trumpaccounts.gov.
However you choose to open a Trump Account, it won’t be open for contributions until July of this year.
Once you open an account, a financial institution will handle the funds, though the website did not go into detail.
Why might you want to open a Trump Account?
Supporters of Trump Accounts say they allow more people to benefit from investing in the stock market. Critics say the accounts won’t help kids in their early years.
There are better tax benefits from 529 accounts, The Wall Street Journal noted, but parents and guardians who want to help their kids get an extremely early start on saving for retirement might want to consider Trump Accounts.
“Some people [will] say, ‘Hey, you’ll put $1,000 in my thing, I’m gonna take it!’” Ken Mahoney, chief executive of Mahoney Asset Management, told The Post.
“But I don’t think it should change college planning for people who have already been putting money into the 529 plan,” he added. “I still think to save for college, the old … 529 plan is way better.”
