Trump Accounts – An Update

Just a short update on Trump Accounts.   https://trumpaccounts.gov/

Myself, I wish they had named these “Ben Franklin” accounts, in honor of the first American, the Favorite Founder. 200+ years ago, Ben showed us how to do super long term investing.

Read: M. Meyer, Benjamin Franklin’s Last Bet, The Favorite Founder’s Divisive Death, Enduring Afterlife, and Blueprint for American Prosperity, 2022, Harper Collins

Beyond Ben

Not only will you want to investigate this opportunity. You will also want to prompt your employer to consider adding Trump Accounts to your employer’s IRC 125 cafeteria plan (pre-tax contributions for health and welfare benefits – medical, dental, vision, life, LTD, Health FSA, Dependent Day Care FSA, Health Savings Accounts).

Effectively, this treats your child’s Trump Account on much the same basis as a Health Savings Account – such as the ability to accumulate assets and use such savings as income in retirement (after age 65). Hopefully, guidance will confirm that the child, upon reaching age 18, will be able to convert to a Roth basis during periods when they are in a low marginal income tax bracket. 

With a cafeteria plan deferral, money goes in pre-tax for Fed, State, FICA, FICA-Med, accumulates tax deferred, and while it is taxable as ordinary income after age 65, … the tax preferences are significant.

Because they are pre-tax for FICA and FICA-Med, it also provides the employer a modest financial incentive (typically, a 7.65% x contribution amount reduction in FICA and FICA-Med) from adding Trump Accounts as an eligible feature to their cafeteria plan.

Even if you are not interested, you can do your coworkers a favor by pitching Trump Accounts as an eligible option of your employer’s cafeteria plan. Not sure whether a cafeteria plan election would have to be limited to a child who you claim as a dependent for tax purposes (keep in mind that pre-tax cafeteria plan contributions are the same for children up to age 26 covered under your health plan – whether or not they are tax dependents).  

Let’s go!