Trump Accounts are now open – and should be viewed on a financial, not political basis. There’s an old saying: “Don’t look a gift horse in the mouth!” It applies to this newly created product, designed to build assets and an interest in investing for young children.

With the official launch on July 4th, if you have a child under the age of 18, you should investigate the opportunity – regardless of your politics. If you have a child born between Jan 1, 2025 and December 31, 2028, you are eligible for a special $1,000 free gift bonus from the government. The child will need its own Social Security number to qualify.

This investment is designed to grow funds for your child, not to support a political party or the President. It’s legitimate to question where the money will come from – but you don’t do that for other government programs, so why start now? Keep your emotions in check and look at the financial reality.

Smart money philanthropists, including Michael Dell and Ray Dalio, have set up foundation money to contribute to the accounts on behalf of low income children. The money in the accounts will be invested in broad-based stock market index funds, designed to track the growth of the American economy. The goal is to give a new generation a stake in the American economy.

How to Get Started
The website for these accounts is TrumpAccounts.gov. There you will follow simple steps to set up an account for your child, or separate accounts for each child. The first step is to fill out form 4547. There is a link to do that at the site.

Note: This is an IRS form, so you will need to have established an Id.me account to access your IRS account. The only other information needed is your child’s name, address and Social Security number.

You’ll then receive an activation email to finalize the account. You’ll also want to download the app at TrumpAccounts.gov, so you can track the account and the investments you add to it.

A total of $5,000 can be contributed to each child’s account, each year. The money can come from family, friends and employers. (Contributions of up to $2500 per child toward the $5,000 limit are not treated as income to the parent-employee.)

Parents or legal guardians open and manage the account, maintaining control until the child turns 18. The money inside the account grows tax-deferred, until it is withdrawn.

Withdrawing Money from A Trump Account
The money must stay in the Trump Account until the child reaches the age of 18. At that point it is designed to be used for a child’s future goals such as higher education or starting a business. (There may be penalties for early withdrawal, or for some uses of the funds.)

At withdrawal, ordinary income taxes may be triggered. Currently a child can earn up to $2700, and income above that amount would trigger income taxes based on the parents’ (or custodial parent’s) marginal income tax rate, rather than the child’s tax rate. Of course, all that may change in the intervening years.

Comparison with 529 Plans
A child can have both a 529 plan and a Trump account. But you should understand the significant differences.
With a 529 plan there is a far higher contribution limit than the $5,000 per year Trump Account. Parents, grandparents and others can contribute substantial amounts to the 529 plan, with limits set by each state.

Money comes out of the 529 Plan tax-free – if it is used for educational expenses, unlike Trump Accounts which are taxable withdrawals described above.

And if the child doesn’t need all the money in a 529 plan, perhaps because of scholarships, the money can be used by other children in the family. Or up to $35,000 in excess 529 plan funds can be converted over a few years into a Roth IRA on a tax-free basis from a 529 plan. Trump accounts do allow Roth conversions, but they may trigger taxes.

Enticing Examples
While making clear that there are no guarantees with stock market investments, the TrumpAccount website offers these illustrations based on historic stock market returns.

That initial $1,000 government gift contribution for your baby could grow to $6,000 at age 18 – with no additional investments. But adding just $250 a year to the account would, in this example, grow to $19,000. And if the full $5,000 were added to the account each year, the value at age 18 is projected to be $271,000!

Bottom Line: If you are in a position to save for your child or grandchild’s college education, a 529 College Savings Plan offers the opportunity for much larger tax-free growth of funds toward that goal. But there is no reason, assuming you can afford it, not to have both accounts – a significant bet on both your child’s future and the future of America. And that’s The Savage Truth.