When we first wrote about Trump Accounts in January, the guidance was still evolving. We recommended opening accounts if you had children who qualified for the $1,000 contribution (born between 1/1/2025 – 12/31/2028). For other children, we felt there were better saving options. As expected, there have been a few notable updates since then.

Most importantly, the Treasury has clarified that these accounts will convert to a Traditional IRA at age 18. This change provides greater structure around how distributions will be treated and creates additional planning opportunities. It also means that, at age 18, the account holder gains full control of the account.

Planning Opportunity: Roth Conversion Strategy
One potential strategy is to fund these accounts early and, once the child reaches age 18, consider converting the account to a Roth IRA during low-income years. In many cases, tax rates may be relatively low at that stage, making conversion more attractive. Parents may also choose to assist with the tax liability at the time of conversion.

Roth IRAs offer flexibility. Qualified withdrawals are tax-free, and contributions (principal) can generally be withdrawn at any time without taxes or penalties.

A key consideration:

  • It will be important to track after-tax contributions carefully. When converting to a Roth IRA, taxes should only be owed on the investment growth—not on contributions that have already been taxed.

If Maintained as a Traditional IRA
If the account remains a Traditional IRA, there are several penalty-free withdrawal provisions prior to age 59½, including:

  • First-time home purchase (up to $10,000)
  • Qualified birth or adoption expenses (up to $5,000)
  • Qualified education expenses

(There are additional exceptions and rules to consider, which can be found here.)

Implementation Details
The Treasury has selected Robinhood, in partnership with Bank of New York Mellon, as the program’s broker-dealer and initial trustee. Current guidance indicates that these accounts are expected to become available in July.

To open an account, you will need to complete: Trump Account Election Form (IRS Form 4547)