Trump Accounts

Do you remember ERTA, 1981 legislation which liberalized the Individual Retirement Account statute so everyone with wages could contribute up to $2,000 a year and take a tax deduction? Contributions increased from 4.8 Billion (1981) to 28.3 Billion (1982) or 490%!

And, do you remember the Tax Reform Act of 1986, which did not change eligibility to contribute to an IRA, every American wage earner and their spouse remain eligible to contribute, but by mucking up the tax deduction, IRA contributions declined by 63% from 1986 to 1987 – 37.8 Billion (1986) to 14.1 Billion (1987)?

Today, there are the new “Trump Accounts”, as described in detail by Bogdan Sheremeta, One Big Beautiful Act: Tax Breakdown and Planning Strategies, 8/15/25.

There are still a number of questions about these accounts, which are scheduled to be available July 1, 2026:

Must the account be established by the federal government? Probably not, since the government contribution of $1,000 only applies to children at birth. The majority of children eligible for a Trump Account are lives in being.

Who makes the election to accept the $1,000, and how?  Probably the parents, and perhaps on their federal income tax return.

Will Roth conversions be allowed and if so, are they available before age 18?

Will RMD rules apply if these are maintained as Traditional IRAs?

There is a $2,500 limit on employer contributions, is it annual or lifetime, is it per child or per employee?

Do employer contributions count towards the $5,000 annual limit?

I have many other questions, such as after reaching age 18, do the regular IRA rules, contribution limits, investment options, etc. apply?

Anyways, the reason for my post is to encourage you to invest in Trump accounts for your child, grandchild, neice, nephew, … to create a legacy, to help children develop a savings habit (a savings account to be maintained for their entire life).

In 1984 and 1987, when each of my two children were born, I opened up Uniform Gifts to Minors Act tax deferred annuities with $1,000 gifts and invested those monies in equity index funds. The goal was to achieve a 12% tax deferred rate of return (the average annual rate of return for the S&P 500 from 1946 to 1984 was estimated at 11.6%) for 60 years – which, if you remember your powers of 2, takes $1,000 at birth and changes it into $1MM at age 60 (ignoring sequence of returns risks).

Along the way, I moved those monies to Roth IRAs. As of today, both are on track to be IRA Tax-Free Middle Class Millionaires, in 2044 and 2047.

I call them Ben Franklin Child Roth IRAs. Why Ben Franklin and long term investing? I encourage you to read: Ben Franklin’s Last Bet, The Favorite Founder’s Divisive Death, Enduring Afterlife, and Blueprint for American Prosperity by Michael Meyer.

For Ben, long term was 200 years!

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