As my friends and family will attest, I am no fan of our current president.
But I know a good deal when I see one.
I have to give President Trump and his administration credit for providing children of Rowan County, and America, what might well be considered a “good deal” for them and their future economic security.
I am referring to the brand new, self-promoting (as admitted by President Trump) “Trump Accounts” for children. This new retirement account (technically known as a “530A-IRA Account”) is a long-term savings account made possible through last year’s One Big Beautiful Bill Act. As described by members of the Trump administration, the goal is to help young people build savings for retirement while also having some “skin in the game” of the American economy and equities markets.
Unlike other retirement accounts, these are targeted to youth under the age of 18, but come with a very enticing incentive for those children born between January 2025 and December 2028. Namely, for babies born during this period, the government is providing seed money of $1,000. And thanks to the generosity of philanthropists Michael and Susan Dell (who have given an additional $250 per child in certain zip codes, including those in Rowan County) local children can begin their lives with $1,250 in immediate contributions to these savings accounts.
The Trump Accounts will “go live” on July 4, which means that the US Treasury will begin depositing $1,250 into accounts of babies as soon as next week.
The administration makes no secret that they want these accounts to promote President Trump and the administration. The way you begin the process if you are a parent, grandparent or legal guardian is to create an account at “Trumpaccounts.gov.” They have created an app for Apple and Android phones that is easy to use and admittedly has a lot of helpful information on investing.
Once an account is created (the child must have a social security number and physical address), they will need to file a “Form 4547” with the IRS. (Yes, the IRS form is also designed to promote the president, reflecting the numerical order of his terms in office). This will require an “id.me” account if done online, which is the preferred and recommended process by the IRS.
Once created, these accounts will be managed in index and mutual funds with very low fees. The initial manager of funds for the Treasury Department will be “Robinhood,” although the Treasury Department might name other management firms in the near future. Congress capped all management fees and prescribed particular investment strategies for these equity accounts.
It is hoped that once created, parents and family members will contribute more funds to these accounts (which are made from after-tax earnings). Contributions will be capped at $5,000 per child per year, and employers can contribute up to $2,500 towards the accounts of their employees’ children. Nonprofits and governments can contribute additional funds.
The funds cannot be accessed until the child turns 18. Because the program is technically a retirement account, withdrawals will be taxable when taken. Thus, a 529 plan (which allow tax-free withdrawals from accumulated earnings for educational expenses) might be preferable for those most interested in providing educational funds for their children. But the Trump Accounts can be used for other needs later in life, such as down payment on a first home, a medical need, or (if left to grow) a more comfortable retirement, which is the ultimate goal.
In addition to wanting more young people to be invested in this country’s future economic growth, there was also much discussion from the administration last year about how these accounts might help our country improve financial literacy for our citizens. The Trump Account app will continue to provide tracking of account performance, updated educational modules for learning, tax information, etc. And schools, neighborhoods and other social institutions have the ability to raise funds and awareness for the children of their sub-communities.
The Trumpaccounts.gov website uses historically high recent returns from the stock market to promote how these accounts might compound. On their website, they show that accounts funded at $5,000 per year could conceivably generate hundreds of thousands of dollars for use by age 27, and millions of dollars by the age of 55. They also show that even if no additional contributions are made, the $1,250 could compound to hundreds of thousands of dollars by age 55. Of course, there is no way to predict the future returns on these accounts and I would caution any parent to not set unrealistic expectations on their investments, and to consult with professional financial advisors. Nevertheless, I must admit that the promoted returns on these initial investments are pretty eye catching.
While these accounts are intended to earn income for retirement, they may be accessed earlier in life, provided they are not taken out before age 18.
I think it might be regrettable that the administration has so unabashedly tied these accounts established by Congress to the Trump name and brand. I fear that immigrant parents of American citizen children might not feel comfortable sharing their personal information with a new government program at this moment in time. I also worry that people without means might feel that this is just another retirement account for people who can afford to save with their “extra” disposable income. And as a former young parent myself, I am concerned that many young parents have enough other concerns in their lives right now than to download another app and fill out more tax forms…
Which is why I am writing this today, and will continue to share this information with any parent that will listen!
A parent in Rowan County can invest a little time in the next few months to claim $1,250 for their child to grow over time. This is an opportunity that is timely and doesn’t come along very often!
I would implore all those agencies and people working with young parents to apprise themselves of the basic information on how these accounts work and how to set them up, then share that information liberally.
I have no doubt that our kids will someday thank us for doing our part to spread the word about this opportunity while it exists.
Jason Walser is executive director of The Blanche and Julian Robertson Family Foundation.
