Introduction & Hosts

Madison: Hello, everyone, and welcome to Not Just Numbers, Honest Conversations with a Financial Advisor and Lawyer. I am Madison Demora and I’m here with Mike Garry. Mike is a financial advisor and a CFP practitioner and the founder and the CEO of Yardley Wealth Management. He is also an estate planning lawyer, and his law firm is Yardley Estate Planning. Hey, Mike.

Mike: Hey, Madison. How are you today?

Madison: I’m good. How are you?

Mike: I’m good.

What Are Trump Accounts?

Madison: All right, so today, Mike, I want to start with something I think a lot of families are hearing about right about now. We had someone ask recently, what are these Trump accounts, and do I need to do something? Are you getting those questions, too?

Mike: Absolutely. It’s coming up a lot right now.

Madison: And it makes sense, right? It’s brand new. It’s launching July 4th, which is definitely a memorable debut date for a savings account.

Mike: It is. And people’s reactions have been all over the place. Some clients are excited, many are skeptical, and some just want to know if it’s something that they’re missing.

Madison: That’s exactly why I wanted to talk through it today. Because there are some genuinely useful things here, but also some details that are easy to miss if you’re only hearing about it in the news. So, at a high level, how should families think about these accounts?

Mike: So I think the most important thing to say up front, Maddie, is that this account isn’t replacing anything families may already have. It’s a new vehicle. And whether it makes sense depends on your kids ages, where you live, and what you’re trying to accomplish.

Madison: So it’s not automatically a yes or a no.

Mike: Exactly. It’s a tool. And like any tool, whether it belongs in your toolbox depends on what you’re building.

Madison: I like that.

Mike: I couldn’t help it. Sorry.

The $1,000 Federal Seed: Who Gets It and How

Madison: Let’s start with the thing everyone is most curious about, the $1,000 from the government. So who actually gets it?

Mike: So the U.S. treasury makes a one-time $1,000 contribution into the child’s account. But it only applies to children born between January 1, 2025 and December 31, 2028. And the child has to be a U.S. citizen.

Madison: Okay, just to make that really clear, a baby born in 2025 may qualify, but a child born in 2024 would not?

Mike: Correct. Child born in 2024 would not receive the federal seed money.

Madison: Are there income limits for the parents?

Mike: No. It’s another important point. There are no income requirements. It doesn’t matter what the parents earn. If the child was born in that window and has a valid Social Security number, they may be eligible.

Madison: How does a family actually claim it?

Mike: So they have to file IRS Form 4547. For children born in 2025, they can file through TrumpAccounts.gov or with their 2025 tax return. For children born in 2026 or later, they have until December 31st of the year the child turns 17.

Madison: Okay, so there is time, but there’s also a benefit of doing it earlier.

Mike: Exactly. The earlier you open it, the longer that money has to grow.

Madison: And that’s really the point of the account, right? Giving the money time to compound.

Mike: That’s right. If you put $1,000 into a low cost U.S. equity index fund when a child is born and let it sit for 17 years, and even without adding another dollar, you could be looking at a meaningful amount by the time they reach adulthood.

Madison: So even if a family isn’t sure whether they want to contribute more money later, just opening the account for the free thousand dollars could still make sense?

Mike: Yes, filing costs nothing. So for families with a newborn who qualifies, opening the account and starting the clock is probably the most time sensitive action. Just open the account. Start the clock.

Grandparents and Family Gifting

Madison: And what about grandparents? Could a grandparent be the one to open the account?

Mike: Yes. The parent, grandparent or another adult can file the form on the child’s behalf. And once the account is open, grandparents can contribute to it just like anyone else.

Madison: I could see that being appealing for multi generational gifting. Instead of another toy for a birthday or holiday, a grandparent could put money into something that has long-term value. And a toy maybe.

Mike: Yeah, well, exactly. It fits naturally with that kind of gifting.

Madison: And I imagine some people are comparing that to the way that grandparents have traditionally contributed to 529 plans.

Mike: Right, Maddie. Same instinct, but a different vehicle. And we’ll want to talk through how those two compare.

How Contributions Work

Madison: All right, let’s talk about the contribution rules, because this is where I think the details get a little more, a little more nuanced. Who can contribute to a Trump account?

Mike: So parents, grandparents, siblings, friends, really anyone can contribute.

Madison: And what’s the annual limit?

Mike: The combined annual limit is $5,000 across all individual contributors. That limit is indexed for inflation starting in 2027.

Madison: Okay, so combined is the key word there.

Mike: Exactly. It’s not 5,000 from mom, 5,000 from grandma and 5,000 from someone else. It’s 5,000 total from all individual contributors in a given year.

Madison: And what about employers? I know that’s another part of this that people may not expect.

Mike: Yeah, right, you don’t see that too often. Employers can contribute up to $2,500 per year. But that amount counts towards the $5,000 annual limit.

Madison: Okay, so if an employer contributes, it reduces the amount the family can contribute that year?

Mike: Correct. But why not take it, right? You some major employers have already announced that they’ll match the government’s $1,000 for employees’ children’s accounts. In that case, a family can start with $1,000 from the government, $1,000 from the employer, and still have $3,000 left for family contributions in year one.

Madison: Which gets them to the full $5000 annual limit pretty quickly.

Mike: Yep. And then the goal is to let that compound in a low-cost index fund for 17 years.

Taxes and Record Keeping

Madison: Now let’s talk about taxes, because I know this is where people can get confused. Are contributions deductible?

Mike: Individual contributions from parents, grandparents and family members are after-tax, so no deduction. So you don’t get a deduction for putting money in, but those contributions can come back out tax-free later.

Madison: But the federal seed money and employer contributions are treated differently?

Mike: Yes. The federal seed and employer contributions are treated as pre-tax and taxed as ordinary income when withdrawn.

Madison: So the source of each dollar really matters.

Mike: Very much. It’s one of the biggest things families need to understand from the beginning.

Madison: What kind of record keeping should people be doing?

Mike: Well, they should track where each contribution came from, when it was made, and whether it was after-tax or pre-tax. If you keep good records from day one, it’s manageable. If you don’t, you could create quite a headache for yourself or for the child down the road.

Madison: So this isn’t one of those accounts where you can just assume the tax reporting will be simpler later.

Mike: Yeah, I wouldn’t. I think good record keeping matters here.

Where the Money Is Invested

Madison: All right, so once the money is in the account, where does it actually get invested?

Mike: This is one of the more unusual parts of these accounts. The law restricts where the assets can be held. The money has to be invested in low-cost U.S. equity index funds or ETFs, and there’s a fee cap of 0.10% annually.

Madison: So families don’t get to choose just any investment?

Mike: Correct. No bond funds, no international funds, and no individual stocks.

Madison: That’s pretty specific. So if someone says, I want something more conservative, that’s not really an option inside this account?

Mike: Exactly. The structure is what it is. It’s designed around a low-cost, passive, U.S. equity allocation.

Madison: For a long time horizon, that can make sense historically. But it’s also not a diversified portfolio in the broader sense.

Mike: That’s right. For young child, a long time horizon helps, but it’s still a concentrated allocation. There’s no diversification into other asset classes inside this account.

Access to the Money: The Growth Period

Madison: And what about access to the money? Can the parents take money out of it if they need it?

Mike: No. The growth period runs until December 31st of the year the child turns 17. During that period, there are no distributions. Not by the parents, and not by the child. It just grows.

Madison: So I could see some parents actually liking that.

Mike: Yeah, many do. They hear, no one can touch it, and they find that reassuring.

After the Growth Period: The Traditional IRA

Madison: So what happens after that growth period ends?

Mike: So the account converts to a traditional IRA, and the child takes full ownership.

Madison: So once the child owns it, what, can they use it for?

Mike: So penalty-free uses include qualified higher education expenses, a first home purchase up to $10,000 lifetime, and retirement savings after age 59 and a half.

Madison: But technically, once they’re an adult, they can do whatever they want with it.

Mike: Technically, yes. If they withdraw for another reason before age 59 and a half, they’ll owe ordinary income tax plus a 10% early withdrawal penalty on the taxable portion. But legally, nothing stops them from taking the money. I’m thinking that penalty is going to be a big, big thing years from now, 17 years from now.

Madison: That’s a really important difference from a 529 plan.

Mike: It is. A 529 is built around education spending. And that’s usually, early in life. Right. Like most people’s education spending is in their late teens and twenties. Tax benefits are tied to those expenses. But, the Trump accounts are different because after the child reaches adulthood, there’s no legal restriction that forces the money to be used for education.

Madison: So if a grandparent opens one specifically hoping it will fund college, they need to understand that the child could choose a completely different direction.

Mike: Exactly. It’s not necessarily a dealbreaker, but it is a family conversation to have before contributions start. One other part that I had forgotten earlier, when we’re putting this together is that, the 529 that’s in the parent’s name. Right. So somebody can take money out of a 529. Right. When somebody’s in their 20s or 30s and pay tax on the gains and the penalty for using it earlier, so like the Trump account, it can be used for other things. The difference is in the Trump account it turns into the child’s name whereas the 529 stays in the adult parent or grandparents name, doesn’t go into the child’s name unless the parent or grandparent makes the active choice to change it to the child. So I just wanted to clear that up because I didn’t think about that before. But as we’re, as we’re going over this, just realize now I should have put that in there.

The Things People Don’t Expect: State Taxes

Madison: Let’s talk about some of the surprises. What are the things people may not expect when they first hear about these accounts?

Mike: Biggest one is state taxes.

Madison: That’s interesting because I think people hear federal account and assume the tax treatment is automatically the same everywhere.

Mike: Right. But states don’t automatically follow federal rules. California is a prominent example right now. As of today, California does not conform to Section 530A. So for a California family, gains that are deferred at the federal level could still be subject to state income tax.

Madison: That could meaningfully change the math.

Mike: It sure can, especially depending on the state tax rate. California does not have low state tax rates either.

Madison: And I imagine it’s still evolving.

Mike: Yep. State-level guidance is still evolving. So before putting in substantial dollars, it’s worth speaking with a tax professional about how your state treats these accounts.

Madison: So the question may not be, should I open the account? It may be before I contribute more How does the state treat it?

Mike: Exactly. I mean, the free federal seed money, that’s not an easy thing to say quickly. Free federal seed money, it’s one thing. Additional contributions are where families should pause and understand the state tax implications.

Record Keeping and Reporting

Madison: All right, so what else catches people off guard?

Mike: The recordkeeping piece. You know, we mentioned it earlier, but it becomes especially important at withdrawal time.

Madison: Because that tax treatment depends on where each dollar came from.

Mike: Yeah, and I don’t see how this is going to work really. After-tax contributions from family members can come back out tax-free. But pre-tax dollars, including the federal seed and employer contributions, are taxed as ordinary income when withdrawn. That’s going to be hard to keep track of.

Madison: And if a family hasn’t tracked that from the beginning?

Mike: Then it gets messy. Look, I think even if they do track it from the beginning, it’s going to be hard because how much is it going to grow and what’s going to be invested in what? And by the time the child is 18 and ready to use the money, people may not remember exactly who contributed what and when.

Madison: So keep a simple record. From the beginning.

Mike: Exactly. Date, amount, contributor, and whether it was an individual after-tax contribution, federal seed money, or employer contribution. It doesn’t have to be complicated.

Madison: One more thing I’d ask, are financial institutions fully built out for this yet?

Mike: Some are still building their reporting tools. So for now, some of that tracking may fall on the family rather than being perfectly reflected on the account statement.

Madison: So the infrastructure is still catching up to the law.

Mike: Yeah, that’s a nice kind way of putting it. You are always kind, Maddie. And you’re being kind here.

Trump Account vs. 529

Madison: Thank you. So this is probably one of the most practical questions families will ask, I already have a 529, why would I add a Trump account?

Mike: Well, because they’re doing different things. A 529 is purpose-built for education. The growth is tax-free, withdrawals are tax-free for qualified education expenses, and the whole structure is built around that goal.

Madison: So if education funding is the main goal, the 529 is still the stronger education specific tool?

Mike: Yep. For that specific purpose, the 529 is still very strong.

Madison: So where does the Trump account fit in, then?

Mike: So it’s broader and more flexible. It can be used for education, part of a first home purchase, retirement later on, and technically anything else after 18, though those other uses may come with taxes and penalties.

Madison: So it may appeal to families who want to give the child options beyond college.

Mike: Exactly. Or families who are already funding a 529 and want to do something additional.

Madison: So there’s no rule against having both?

Mike: No, no rule against it at all. I’d frame it this way: 529 is the education-specific bucket. The Trump account is a longer-range, more flexible bucket that can support whatever the child ultimately needs.

Families With Older Children

Madison: And what about families with older kids? Let’s say a child was born in 2022 or 2023. They don’t qualify for the federal seed money. Is it still worth opening?

Mike: Potentially. The account is still available to any child under 18 with a valid Social Security number. They just won’t receive the thousand dollar government contribution.

Madison: But the rest of the structure is still the same?

Mike: Yep. Same $5,000 annual contribution limit, same low-cost index fund requirement, and the account converts to IRA at 18.

Madison: So even for, say, a 10-year-old, there may be several years for that money to compound.

Mike: Exactly. Eight years in a low cost U.S. equity index fund is still meaningful. Whether it makes sense depends on the family situation and what else they already have in place.

Madison: I also think the traditional IRA conversion is interesting. It’s almost like you’re helping build the child’s retirement account before they’re old enough to do it themselves.

Mike: Yeah, I mean, that’s one of the most compelling ways to think about it. If an 18-year-old has a traditional IRA with several years of compounding already in it, and they have the discipline to leave it alone, that could be a really real big head start.

Key Action Steps

Madison: All right, Mike, so if someone is listening and wants one action item, what would you tell them?

Mike: If you have a child or grandchild born in 2025, 2026, or later, open the account file Form 4547. Don’t wait. The earlier you do it, the longer that $1,000 has to grow.

Madison: And even for families with older children, it may still be worth looking at whether a Trump account has a role alongside with what they already have.

Mike: Exactly. But before putting in significant dollars, check your state’s tax conformity and talk with your tax professional about how contributions and gains are treated in your state.

Madison: And if someone is trying to figure out how this fits in with the 529, Roth IRA, or the rest of their financial picture, that’s where we can help.

Mike: Absolutely. We’re happy to help families think through how all these pieces fit together.

Closing & Contact Information

Madison: Thanks, Mike. This was really helpful.

Mike: Thank you, Madison.

Madison: For more information on Yardley Wealth Management or Yardley Estate Planning, you could visit our websites at yardleywealth.net and yardleyestate.net. You can also follow us on socials at, Yardley Wealth Management. Don’t forget to subscribe to our YouTube channel. This podcast has been produced by Madison Demora and Mike Garry with technical and artistic help from Poe Productions.