Trump Accounts Are Coming: What Parents (Especially U.S. Parents in Israel) Need to Know:

Trump Accounts Are Coming: What Parents (Especially U.S. Parents in Israel) Need to Know:

Many parents are confused about the new Trump Accounts for children. Some believe it is similar to Israel’s 50-shekel per month program. Others think it is automatic or guaranteed money.

Here is what is actually known so far, based on the official White House policy document.

It is important to note that many details are still unclear, and the IRS has not yet released final regulations.

What Trump Accounts Are

• A retirement account for minors

 • Invested only in broad U.S. stock index funds (such as the S&P 500)

 • Automatically becomes a Traditional IRA at age 18

 • Offers long-term, tax-deferred growth

What They Are Not

• Not a college savings account

• Not a fund for early adulthood expenses

• Not a program to help with wedding costs or short-term needs

The $1,000 Government Seed:

This part is often misunderstood.

The $1,000 is not automatic.

Parents will need to file Form 4547 to claim it.

Even parents who normally do not file a U.S. tax return will likely need to file 

Form 1040 for this purpose.

 If the election is not filed, the $1,000 is not received.

In addition, the $1,000 must be manually invested in an index fund. If not invested, it will simply remain $1,000.

Annual Contribution Opportunities:

Parents may deposit up to $5,000 per year, with the limit increasing by two percent annually beginning in 2028.

Employers may contribute up to $2,500 tax free, similar to employer retirement-plan matches.

For families who are able to contribute, these amounts significantly increase long-term retirement savings.

Account Setup:

Most parents will need to take the following steps:

 • Open a custodial brokerage account (Schwab, Fidelity, Vanguard, etc.)

 • Link the account information to Form 4547

 • Manage the investments until the child turns 18

Withdrawals:

At age 18, the account becomes the child’s IRA.

Withdrawals at that age are allowed but subject to the standard IRA rules, including a 10 percent penalty and ordinary income tax unless the child has no income.

This is why the account is intended to be a retirement vehicle rather than an early-adulthood savings plan.

Flexibility Considerations:

Families who expect to need funds earlier for education, housing, weddings, emergencies or other major expenses may find that a UTMA account is a more flexible option.