President Trump wants to give $1,000 to baby
All children born between 2025 and 2028 will be eligible for a Trump account with a $1,000 government deposit.
More than 6.5 million children are enrolled in Trump accounts, even as advisers continue to debate whether they are truly the biggest savings vehicle for children.
This year, children under 18 with Social Security numbers can enroll in tax-deferred investment accounts. Individuals, corporations, state and local governments, and eligible charities can contribute up to a total of $5,000 annually to Trump accounts, but the $1,000 in Treasury seed money is only available to U.S. children born between 2025 and 2028. About 1.4 million children who registered were eligible to receive $1,000, according to a U.S. Treasury Department spokesperson.
The Trump account invests in low-cost index funds. Withdrawals are not allowed until the year the child turns 18, at which point they are treated like a traditional IRA with essentially the same rules.
Most advisors tell their clients to sign up for a Baby Trump account to get a free $1,000, but reviews beyond that are mixed. Some people tout that you can convert your Trump account to a Roth IRA at age 18, making the tax-deferred growth tax-free for life. Others said that while it can be appealing, it depends on what your money plan is and how much faith you have that things will never change.
“While the Roth conversion is taxable, decades of tax-free growth are attractive,” said Richard Pong, a San Francisco certified public accountant. But “it really depends on what that money will be used for, when it will be used, and how confident we are that the Roth Act will survive.”
How can a Trump account be tax-free?
You typically need income to open a Roth account. Even a youth Roth IRA can only receive income earned by children doing jobs like babysitting, mowing lawns, or delivering newspapers.
But the Trump Account “creates a legal path to a Roth IRA that is not dependent on earned income contributions,” Matt Sorensen, founder and CEO of Directed IRA & Directed Trust Company, said in a blog post.
The loophole, advisers say, is that the child becomes eligible for Roth conversion in the year he turns 18 and the Trump account converts to a traditional IRA. The move to an IRA also expands investment options beyond the low-cost index funds allowed in the Trump account.
“And if you’re strategic about how you convert your Traditional IRA (formerly Trump Account) when your child reaches 18, there will be no taxes on the Roth conversion,” Sorensen said.
Zeroing out taxes on a Roth conversion assumes the 18-year-old or young adult has little or no income that would put them in the federal zero-tax bracket, he said. “As long as the taxable portion of the Roth conversion is less than or equal to the standard deduction ($16,100 in 2026), no taxes will be paid on the conversion amount,” Sorensen said.
But even if a young person has “little taxable income, converting the account to a Roth IRA can lock in decades of tax-free growth while potentially claiming a decent tax bill,” Luke Delorme, director of financial planning at Tableau Wealth, writes in a blog for the Boston University Center for Retirement Research.
Should the Trump Account be a top-tier savings plan?
Despite some advantages of the Trump account, some advisers said there may be better options depending on what you want to use the funds for.
For example, if the money is intended to be used to pay for college, “parents are better off using a 529 plan, where withdrawals are tax-free,” says Pong. Some of your leftover 529 funds can also be rolled into a Roth IRA later for tax-free growth. The Guardian also offers an upfront state tax deduction for donations.
Kids 18 and older “are earning income…Instead of doing a taxable Roth conversion at age 18, they can just open a Roth account now,” Pong said.
Finally, he said the Trump account conversion twist “assumes that Roth conversions are still allowed at age 18.” “Laws change over time, so you never know what’s going to happen. For example, when Social Security was first introduced, it was tax-free. Then it became partially taxable in the 1970s. When I bought my condo, there was no limit on property tax deductions, but now there is a SALT (state and local tax) cap.”
Mr Delorme said the $1,000 pilot contribution seemed like an easy choice for families with children born between 2025 and 2028. Additional employer or philanthropic efforts to seed the account can further increase the early balance. ”
But ultimately, he said, “the relevant question is not whether Mr. Trump’s account is inherently good or bad, but how it fits into a broader savings strategy.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
