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If you’re a new parent or grandparent,
you’ve probably heard
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of a new account type that is a result
of the one big, beautiful bell.
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Today we’re going to be talking about
Trump accounts, what they are,
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how they work, and if they may fit into
your family’s financial plan.
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Let’s chat.
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My name is Gina De Girolamo.
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I’m here today with Adam Larkin.
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And as I mentioned, we’re
talking all about Trump accounts today,
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which is especially relevant for you,
Adam, as you became a new dad in 2025.
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Right? That’s right.
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Awesome. Well,
why don’t we just jump right into it?
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And if you could first highlight
where these Trump accounts came from
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and what they really are.
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Yeah.
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So the Trump accounts came from the one
big beautiful Bill act.
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And, you know, the reason they’re getting
a lot of attention right now
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is just because the government has pledged
that they’ll give $1,000 credit
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to any new parents
or parents of babies born
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between 2025 and 2028.
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But what these accounts are
is that they’re they’re effectively
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pretax IRAs that are set up for children
under the age of 18.
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So even if you have a child,
under the age of 18
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that was not born in 2025 or 2026,
they can still have one of these accounts.
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The entire purpose of them is to set
young people up with retirement accounts,
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you know, sooner than what they might have
otherwise been eligible to invest in.
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And these types of accounts.
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So they’re they’re accounts
meant for young kids, to establish,
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you know, kind of the first steps
to long term retirement savings.
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So you mentioned the $1,000 contribution
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for babies born between 2025 and 2028.
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What does that look like?
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If you’re a parent that just wants
to contribute to this type of account?
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Yeah.
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So let’s go first with if you’ve had
a baby in 2025 or 2026, so have you.
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If you’ve made the election on form
4547 of your tax return from your 2025
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tax return, then you’ve had this account
set up and effectively what’s happened
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and I’ve gone through this myself,
is that I went in,
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I plugged in all of my own information,
my daughter’s information, and
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then was kind of told, okay, you’re
all set to receive your $1,000, right?
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And so in that case, I received that.
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And that’s kind of the initial
funding for the account for anybody else.
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So and I guess this would apply
both for parents of, of young babies, but
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also for parents that did not have a baby
in the last two years.
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You can make contributions
of up to $5,000.
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So that would be parents or grandparents.
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But in total, the contributions
to be made into this account
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can not exceed
$5,000 of your own contribution.
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So if you receive that 1000,
that doesn’t count towards that limit.
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So you could do a thousand plus 5000.
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If you didn’t receive that 1000,
your contribution limit is still $5,000.
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Okay.
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So you mentioned that
this is an opportunity to start
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funding long term savings
and investments for a child.
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What does that the investments look like
in this type of account.
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What options would a parent have. Yeah.
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So what is going to be set up is,
you know, similar to how
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you might have select mutual funds
or ETFs available to you
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in something like a 529 plan.
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Or you might be familiar with this
in your company for one K,
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these accounts will be set up
with primarily, so I’ll use the quotes
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primarily US based equity positions,
via mutual funds or ETFs.
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So they’re going to be you know,
baskets of primarily US based stocks.
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Now what is primarily
I mean the IRS is set to,
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you know, set
some more official guidance on this.
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But what the speculation is right now
is that that’s going to be about 90%
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or more of those mutual funds
or ETFs will be US based stocks.
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So if set another way, what you’re
not going to have ability to invest in.
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And these accounts are bonds individual
stocks or primarily foreign equities okay.
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So on that note
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you also
had mentioned the comparison of a 529.
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When we’re talking about the investments,
folks may have seen this type of strategy
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in something like a 529
when we’re talking about, a parent
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or grandparent looking to start to save
and start to fund for a child.
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We often talk about things like 529,
maybe up my accounts, up
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these other type of account
structures made for minors.
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What would you say the big differences
or a key thing
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that someone should know if they want
to fund Trump accounts or not?
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Yeah.
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So as simply as I can say it, this is a
quote unquote retirement account, right?
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So a Trump account is effectively
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at the age of 18, it becomes a pretax IRA.
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So once your child reaches adulthood
it becomes a pretax IRA.
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Where then all of the,
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you know, traditional IRA rules
that you would be accustomed to,
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including a 10% penalty on withdrawals
under the age of 59 and, nope.
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Sorry, 59.5 would apply.
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That means that these accounts
should be set up with long term
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investing in mind,
whereas 529 accounts and up my accounts.
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So we’ll go.
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529 first 529 accounts are meant to be
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exclusively applied towards
higher education expenses, right?
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So you would think that you can you know,
you can spend some of those dollars
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in high school.
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But primarily these are used as vehicles
to save for college expenses for for kids.
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Sure.
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And then with an Otmar
and an it becomes, you know, an account
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that, a child can use
once they’ve reached the age of majority
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and whatever state they’re in.
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So say, if that’s 18,
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those funds are theirs to kind of use
at their own discretion.
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They have any, you know,
they have the flexibility
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to use those funds on whatever
and whenever they would like.
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So, you know, there isn’t the same penalty
for taking funds pre retirement,
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which I guess again,
so that that would kind of
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be the key distinction
I would create between the 529 and the up.
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My eyes.
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Like those are a lot of times vehicles
to save for expenses.
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Maybe right after a child reaches
adulthood.
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These Trump accounts are means of,
you know, getting a head
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start on the long term retirement savings.
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So when you’re talking to parents,
just kind of going through the logistics
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of having an account like this.
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Yeah.
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Talk a little bit
about how the Trump account is titled,
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who the owner is and how that applies
to the beneficiary or the minor child.
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Sure.
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So the Trump account from the time
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that they’re set up belong
that they’re owned by the child.
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Now, that being said.
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So this would be the same
as an admin account.
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The child is technically the owner,
but until they reach the age of majority,
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the parent is the custodian
of the account, meaning that
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they they’re the ones who are responsible
for deciding, you know, how
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it should be invested
and that kind of thing.
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So the parent kind of oversees
the account from ages 0 to 18,
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but then it legally becomes
the child’s at the age of 18,
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which means that in theory, yes, kids
could take distributions from these Trump
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accounts have become pretax IRAs,
you know, once they’ve reached age 18.
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But they would be
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