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Can 'Trump Accounts' boost savings?

New option would give kids $1,000 seed money

By: Lauren Young
Reuters

NEW YORK - "Trump accounts" are tax-advantage investment accounts designed to boost the savings of U.S. citizens under the age of 18. More than 500,000 families have signed up for the program.
..... The government will launch the program in July. [2026] treasury will deposit $1,000 of seed money into investment accounts for all children born between 2025 and 2028 with a valid Social Security number. The government will invest the money in low-cost index funds that grow tax-deterred. Income taxes are due upon withdrawal. Parents, guardians, an employer or another entity could add more funds to a child's account. the program limited these contributions to $5,000 per year, with the employer portion expected to be limited to $2,500 per year.
..... At age 18, the child will take control of the account.
..... Opening an account requires filing out IRS Form 4547, which can be filed at any time. Later this year, [2026] you will be able to set up an Online account at trumpaccounts.gov .

Who's funding the initiative?

..... Last December, [2025] entrepreneur Michael Dell and his wife, Susan announced they will deposit $250 in the individual investment accounts of 25 million American children in a $6.25 billion philanthropic pledge.
..... Children who live in ZIP codes where the median family income is $150,000 or less will receive the money, according to a spokesperson for the Dells. JPMorgan Chase said January 28 [2026] that it will match the U.S. government's one-time 41,000 contribution to children of eligible U.S. employers.
..... Bank of America also plans to offer a 41,000 match to eligible employees, according to an internal memo seen by Reuters. BofA will let eligible employees make pre-tax contributions to these accounts through payroll deductions, it said in the memo. Trump said on January 28 [2026] that dozens of major employers have signed up to add Trump Account contributions to their employee benefit packages, including Uber, Charles Schwab, Charter Communications and "many, many others."
..... While seed money makes Trump Accounts more appealing, it does not fundamentally change the math or the financial planning considerations, says Dough Boneparth, president of Bone Fide Wealth, a New York finical advisory firm.
..... "A one-time or modernest ongoing contribution can help with engagement and early momentum, but long-term outcomes will still be driven by investment choices and market returns," Boneparth says.

What are the tax implications?

..... Trump Accounts are essentially a custodial retirement account, known as a Custodial IRA, overseen by a parent or legal guardian, says Alex Caswell, a certified financial planner at Wealth Script Advisors in San Francisco, when the child turns 18, the accounts converts into a traditional IRA.
..... The tax implications can be complex, however, since a portion of the account is funded by tax-free distributions, but it can include taxable investments, Caswell said.
..... Withdrawals from a Trump Account also face IRA-style treatment, including penalties for early or non-qualified use, said John Iselin, associate director of economic research at the Budge Lab at Yale.
..... "Help is broad and shallow rather than targeted and large,: Iselin says.

How much could you save?

..... Andrew Hezog, a certified financial planner at the Watchman Group in Plano, Texas, calculates that if you leave the 41,000 seed money alone for 28 years, with an assumption it will earn 10% per year, you will end up with $16,000. since 1957, the S&P 500 has delivered an average annual return of 10.54%.
..... "For new parents it's a deal to get $1,000 from the federal government - take it," Herzog said.
..... Herzog's calculations show that investing the seed money, plus 4100 a month unit age 18 (the age limit for contributions), then letting the account grow for another 10 years would result in approximate $180,000.
..... For those with the ability to save more aggressively, the outcome even more dramatic.
..... Investing the seed money, plus maxing out contributions each year at $5,000 up until age 18, then letting the account grow for another 10 years, would yield a portfolio worth $698,000 by the time the child turns 28.
..... There are some teachable moments when kids have investments in their name as they get older," says Jackie Cummings Koski, a certified financial planner and financial educator. "Like what is an index fund? What stocks do they own in the fund? How much will it grow? What will they use it for?
..... Seed money is a useful nudge, says Tomas Geoghegan, founder and family wealth adviser at Beacon Hill Private Wraith in Summit, New Jersey. "The real impact will come from whether families develop the habit of contributing regularly," Geoghegan said
..... Research shows automatic deposits, immediate matches and clear rules are better methods to boost savings among lower-income households, said Melissa Caro, a certified financial planner in New York.
..... "You put money in now and get the benefit at tax time," Caro said. "That's not how you move behavior for the families this is aimed at."

What details remain?

..... Several pieces are still unclear, including how the account will be treated when families apply for feudal student aid. who will handle the accounts and how they will be held accountable is also unknown.
..... "I've had a few clients who just have birth last year [2025] or this year. [2026] I also had a child," Caswell says. "We're just sitting put, waiting to get more guidance."

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