Financial Planning Tip January 2026

January 2026

We like savings accounts. Tax-deferred savings accounts are even better. But what about “Trump Accounts?” You may suspect (with good reason) that anything with the “Trump” label could represent another way for the first family to line its pockets. However, this isn’t like the Trump meme coin. These savings accounts, officially called “Trump Accounts” by the IRS, are legitimate savings vehicles. Essentially, they are IRAs for tots.

These accounts are limited to children under age 18 and the money cannot be withdrawn until age 18. At that point, the owner has complete control of the account. Distributions are taxed as ordinary income like a traditional IRA and penalties apply if the money is not put to an approved use, like buying a first home or attending college. Any U.S. citizen born January 1, 2025 - December 31, 2028 will get an initial $1,000 deposit from the taxpayers. Many of these children (if they live in the right zip codes) will also get an additional $250 from the Dell charities. Families or employers may contribute additional money (up to $5,000 per year) to these accounts. At age 18 they essentially turn into traditional IRAs.

At this point, we wouldn’t recommend that clients contribute to these accounts because there are better savings vehicles available for children and grandchildren. However, any eligible child should certainly sign up and keep the account. Without any additional contributions, the initial $1,000 at birth would likely be worth just over $5,000 at age 18, assuming historical market returns. And if your employer makes a donation, even better.

For people looking to start children off with a nest egg, however, there are better ways. Roth IRAs are unmatched savings vehicles once a child (or anyone) has earned income. 529 College Savings Accounts have much greater tax advantages, including deductions for contribution and no taxes on withdrawals for education. Even a simple UTMA (gift to minors) account has more favorable tax treatment, can accept larger contributions, and can be used for absolutely anything with no penalties. For larger sums, trust accounts offer the maximum flexibility for donors.

With all that said, some of the rules around Trump Accounts are still being worked out. They won’t be available until July. Talk to us if you want help navigating the many options.