Trump Accounts Are Now Live: Here’s What You Need to Know

Earlier this year, we covered the basics of the new Trump Accounts: who qualifies, how contributions work, and the $1,000 government seed contribution available for certain children. Now that the program is officially live, families can begin opening accounts and making contributions.

Here’s what’s new.

How to Open a Trump Account

There are currently two ways to establish a Trump Account for an eligible child:

• Download the Trump Accounts mobile app and complete the enrollment process.
• File IRS Form 4547 and elect to establish the account for your child.

If you previously filed Form 4547 before July 4, you should receive a notification prompting you to activate your account through the app. It may take a few weeks to see the government’s contribution, but you can start contributing now.

Robinhood Is the Custodian

Robinhood serves as the custodian for Trump Accounts. Although Robinhood is the custodian, account management takes place through the separate Trump Accounts app, where you’ll be able to monitor balances, view investments, and make contributions.

Investment Options

By default, contributions are invested in the State Street SPDR Portfolio S&P 500 ETF (SPYM), a low-cost index fund that tracks the performance of approximately 500 of the largest publicly traded U.S. companies.

Families will also have several other low-cost investment options available, including:

• 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)

These investment choices are intentionally simple, diversified, and designed for long-term investing.

When Can the Money Be Used?

No withdrawals are permitted before the child turns 18. Beginning January 1 of the year the child turns 18, the account transitions to a traditional IRA in the child’s name. At that point, withdrawals can generally be made without the 10% early withdrawal penalty only for certain qualified purposes, including:

• Qualified higher education expenses
• A first-time home purchase (up to $10,000)

Withdrawals for other purposes before age 59½ are generally subject to ordinary income tax plus a 10% early withdrawal penalty.

Planning Opportunities 

1. Don’t Leave Free Money on the Table

A growing number of corporations, foundations, and even some states have announced contributions for eligible children with Trump Accounts. If your child qualifies, these additional deposits can provide an immediate boost to long-term savings! 

You can view the current list of participating organizations here.

2. Consider Roth Conversion Opportunities

Once the child reaches age 18, the account is generally treated as a traditional IRA. If the account contains pre-tax dollars, the early adult years (when many individuals are in their lowest income tax bracket) may present an attractive opportunity to complete Roth conversions.

Paying tax at a relatively low rate today could allow those dollars to grow tax-free for decades. Whether a Roth conversion makes sense depends on the individual’s tax situation and should be evaluated each year.

3. Teach the Power of Investing Early

Instead of simply opening the account and forgetting about it, use it as an opportunity to teach your child about saving, investing, market volatility, and the power of compound growth. Review the account together each year, explain why the balance changes, and show them how even small contributions can grow over time.

By the time they gain control of the account at age 18, they’ll hopefully enter adulthood with both an investment account and a better understanding of saving, investing, and the power of long-term investing.

Bottom Line

With Trump Accounts now officially available, families have a new way to invest for a child’s future while helping introduce the next generation to the benefits of long-term investing. Like any financial planning tool, these accounts come with unique rules, opportunities, and tradeoffs that should be considered in the context of your family’s overall goals.

If you’re wondering whether a Trump Account makes sense for your family or how it fits alongside other savings strategies, we’d be happy to help you evaluate your options.