Trump Accounts Explained: How $1,000 Could Grow Into Much More

Brandy Maben (0:00)

You are eligible to get $1,000 from the government deposited into the account. Even if you only got the $1,000 and it grew at, let's say, 4%, it's almost gonna double by the time they're 18 I don't think everyone in America has the means to really fulfill these accounts.

Maggie Lake (0:23)

Hello and welcome to Wealthion, I'm Maggie Lake. Joining me today to give us an overview of Trump accounts is Brandy Maben, Director at WindRock Wealth Management. Hi Brandy, it's great to see you again.

Brandy Maben (0:33)

Hi, great to see you too. Thanks for having me.

Maggie Lake (0:36)

So there are a lot of programs and offers coming out of Washington these days, but one of the new plans that has generated a lot of conversation, a lot of questions is the Trump accounts aimed at children. Now they were announced as part of the one big beautiful bill, but they just went live this past July. So we thought it would be great to sort of just break down the kind of general details of what they are, so we can understand if it's something people should be talking to their advisor about. First of all, what are they? What is a Trump account?

Brandy Maben (1:06)

A Trump account is a custodial account basically, like an IRA, where it's for children that are allowed to open an account as soon as they're born, and they don't receive full ownership of it until January 1st of the year they turn 18 And it works like an IRA because the tax on it is deferred. So as it grows, they aren't responsible of the tax and neither is the parent or grandparent or whoever did open it for them.

Maggie Lake (1:39)

So I think that there was some offers to seed it with some money as well, which is where the attractiveness comes in. So who qualifies and does everyone get that initial investment from the government or from the government's partners? How does that work?

Brandy Maben (1:56)

Right. So there's a couple of different funding options. One, if you were born January 1st of 2025 up until 2028, you are eligible to get $1,000 from the government deposited into the account, which is fantastic. You do have to follow some requirements that the IRS has put in place, including being a US citizen. But the IRS website can get really detailed into that application process.

And then, but if you aren't within that age bracket, there are other opportunities to be funded. So Dell gives $250 to some candidates that apply if you have a salary, a gross salary at your house of $150,000 or less, and your zip code lines up.

You can also now, as of August, get $2,500 from an employer gift. So say Wealthion wanted to give their employees a child benefit. It's per employee, $2,500. So if you have two kids, you could pick your favorite and give one all the money this year and one next year, split it right in half.

But that's a fun little benefit that's come about as well.

Maggie Lake (3:14)

That's really interesting. I love that. Hopefully, by the time they're 18, you can fight about it then if you have a favorite. That makes for some great family dynamics at the holiday table. But these amounts are interesting because you can say, okay, $1,250, $2,500. But compounding makes it really interesting.

I think the problem they're trying to solve for is that just getting that initial stake and then letting it grow, it can turn into, I know there's some pretty amazing math around that. So what are the advantages and disadvantages? So if you're thinking about this, and maybe I just talked about one of the advantages, but why would we want to do this aside from the free money? And then are there any disadvantages?

Brandy Maben (4:00)

Right. So anyone that's starting an account at the day of birth is ahead of most of us when we started, right? I didn't invest it one years old, so you're getting these children and grandchildren just a head start with the compounding interest like you talked about. Even if you only got the $1,000 and it grew it, let's say 4%, it's almost going to double by the time they're 18

And that's not adding a dollar more to it. So it's free money for your children. It just makes so much sense to get into it if you can.

Maggie Lake (4:33)

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