Trump Child IRA Accounts

Investment Analysis Clubs Macro Economic Trends and Risks
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a provision in the One Big Beautiful Bill that will create tax-deferred investment accounts for all newborn American children.

  • a provision in the One Big Beautiful Bill that will create tax-deferred investment accounts for all newborn American children.*

https://marginalrevolution.com/marginalrevolution/2025/07/trump-accounts-are-a-big-deal.html
Here are some details:

  • Government Contribution: A one-time $1,000 contribution per eligible child, invested in a low-cost, diversified U.S. stock index fund.
  • Eligibility: U.S. citizen children born between January 1, 2025, and December 31, 2028 (with a valid Social Security number and at least one parent with a valid Social Security number).
  • Employer Contributions: Employers can contribute up to $2,500 annually per employee’s child, and these contributions are excluded from the employee’s gross income for tax purposes. These are subject to the overall $5,000 annual contribution limit (indexed for inflation) per child (which includes parental contributions).

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Here is ChatGPT description:

:baby: The “Trump Account” – a child IRA

Introduced inside the OBBB and starting for children born 2025–2028 .

Structured as a custodial Traditional IRA under IRC Section 408(a), not Roth .

Seeded with $1,000 government contribution per child .

After-tax contributions (parents, family, nonprofits) allowed up to $5,000/year, indexed for inflation.

No withdrawals until age 18; then taxed like a traditional IRA (ordinary rates).
Penalties apply if taken before age 59½ unless for qualified uses (education, home purchase, disability).

Investment in a stock-index-diversified fund; cannot be opened past age 17.

Meant to promote early saving, boost financial literacy, and support future goals like education and home ownership.

Advisors note:

Offers more flexibility than education-focused 529 plans.

No current-year tax deduction, and eventual withdrawals are taxable .

Critics worry about limited investment options, low awareness, and possible better alternatives (529 or Coverdell ESA) depending on goals. }

I italicized n bolded parts.

Contributions are AFTER Tax.
Then distributions are taxed as “normal income”.

IMO, a straight up “taxable, individual brokerage account” with long term capital gains tax rate would be a better choice.

The current 401k, 403b, defined benefit pension, and now 408a…
Distributions are taxed as normal income, at the marginal tax rate …is a backdoor way for the govt to INCREASE future tax revenues.

Most people/savers would better control taxes by putting savings into an individual taxable account and DCA into an index fund.
And pay long term capital gains rate.

:money_with_wings::money_with_wings:
ralph

DCA - Dollar Cost Average

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We will need more information to analyze the Trump Acount.
First, there seems an intent to link the account with a parents employer.
From OP:

  • Employer Contributions: Employers can contribute up to $2,500 annually per employee’s child, and these contributions are excluded from the employee’s gross income for tax purposes. These are subject to the overall $5,000 annual contribution limit (indexed for inflation) per child (which includes parental contributions).
    Obviously employment compensation for the parent will have to be modified. No corporation wants to give away free money. But they would be willing to reduce a parent’s pay compensation by a $2500 employer contribution, nontaxable to the employee, to an employee’s child’s Trump Account.

Second, withdrawals meant for higher education are taxed at a lower rate according to CNN.
The account is intended for expenses tied to higher education or “post-secondary education credentialing,” buying a home or starting a small business.

Distributions for qualified expenses will be treated as capital gains, which are taxed at a lower rate than ordinary income. But they will be taxed as ordinary income and subject to an additional 10% tax if an under-30 beneficiary uses them for other expenses.

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Notice this is also a citizenship test. The kid, and parent, need to have valid SSNs, to open the account.

Steve

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You can have a valid SSN without being a citizen. So not a citizenship test.

It’s not even a legal immigrant test if an H1B immigrant (or other legal status worker) overstays.

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Thanks for reminding me. That being said, Social Security apparently does record whether the recipient of each number is a citizen, or not.

Steve

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My parents started a fund for my daughter when we got divorced. Grew for years and years.

Did DD use the money for college? Nope.
Turned 18, bought a '69 Chevy Camaro but didn’t buy comprehensive insurance. Car was soon stolen. She spent the rest of the money avoiding work.

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This is like watching a generation go from a pension plan that was modest to a 401k.

If the opposition ever mattered, which is an outright refusal to matter, this would be outlawed as soon as possible.

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[quote=“pauleckler, post:10, topic:119678”]
Musk’s American party plans to run balance the budget candidates.

I’ll need to see it, but I am for a 3rd Party to enter the fray. And the American people need to have a reality check, too.
Need to start holding Pol’s feet to the fire, instead of tolerating the fire hose of lies that are coming out.

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Noticed your Avatar. Nice UP glider. My 1st glider was a UP Comet II. Little after yours.

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That bit spawns another “Plan Steve” to “save Social Security”. Decree that, even though non-citizens can be issued SS numbers, and pay FICA tax, only citizens are allowed to receive benefits.

So, the legal resident aliens all rush to become US citizens, so they receive the SS benefits they paid for? Ah. There is a plan for that too.

Looking at the naturalization data, it is apparent that the vast majority of naturalized US citizens are from other than Europe.

So, adopt the same tactic that the US military started using, to reject non-European legal resident alien enlistees, a few years ago “too hard to do the background check”. So all applications for naturalization by non-Europeans go into a bureaucratic black hole, never to be seen again. That means that some 80% of the 12.8M legal resident aliens pay FICA tax through their working life, and never receive a nickle. The base will be fine with that, because all the people being cheated are “others”.
/end crusty mode

Steve

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That was an UP Condor I believe. Grouse Mt International Hangliding contest.
I was 5th place that year.
Next year I won it in a Moyes Maxi.

:blush:

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