Trump Accounts May Create Millionaire Gen-Beta Retirees

Lights! Camera! Activate Trump accounts! 

Contributions are now flowing after the Treasury Department launched its much-anticipated Trump account app this week. Any child under the age of 18 with a Social Security number can participate, and US citizens born between January 2025 and December 2028 can receive a $1,000 government deposit. Maximum annual contributions are set at $5,000, with the money automatically invested in low-cost index funds. It’s a fantastic approach to savings, according to Adam Bergman, a tax attorney and founder of IRA Financial, one that will give millions of young Americans a financial head start by the time they reach adulthood. The biggest impact of the accounts, though, could actually be felt many decades down the line, when the emerging generation of Americans is ready to retire. 

“These new accounts are a way for families to supercharge their kids’ retirement savings,” Bergman told Retirement Upside. “Thousands of dollars invested at a very early age could easily grow to millions by the time someone turns 60 or 65.” 

Trump Accounts as Retirement Vehicles 

It’s not much of a stretch to connect the accounts with retirement goals, Bergman said, considering they are technically a type of traditional IRA with some added restrictions. Withdrawals are generally prohibited before the beneficiary turns 18, for example. Otherwise, they are essentially IRAs with no earned income requirement before age 18, and withdrawals before age 59.5 are subject to standard income taxes plus a 10% early withdrawal penalty. “Again, I’m a big fan, to the point that I would have liked to see some kind of automatic enrollment feature that kicked in when people get a Social Security number,” Bergman said. “That would help ensure that kids who are eligible get the $1,000 government deposit.”  

Currently, the IRS has a priority order for individuals who may open a Trump account on a child’s behalf: 

• Legal guardians are first. 
• Parents are second, followed by adult siblings or grandparents of the beneficiary. 

Specific policies also exist as to who can open an account for foster children, orphans, emancipated minors and wards of the state.

More Than One Option. Bergman stressed that Trump accounts aren’t the only option for saving on behalf of children. One alternative is 529 accounts, which offer significant tax advantages for education expenses. In addition, up to $35,000 in a 529 plan can now be rolled into a Roth IRA. 

Brokerage accounts are another option that could compete with Trump accounts, as detailed in an analysis from the Bipartisan Policy Center. Although they lack tax deferral or tax-free withdrawals, investment returns are typically taxed at the long-term capital gains rate, which is substantially lower than ordinary income tax rates. As a result, the BPC found, a brokerage account invested in a low- or no-dividend mutual fund could potentially outperform a Trump account over long time horizons. 

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