Ep 116Explaining The New Trump Accounts for Orthodox Jews
Tax attorneys call this a legal backdoor into Roth IRA wealth
Eli Langer
Explaining The New Trump Accounts for Orthodox Jews
with Eli Langer
Signing the form takes 10 minutes, preparing the kid takes 18 years. Start both now.
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Quotes
“If you want the free money, it's sitting on the table waiting for you to do 10 minutes of paperwork.”
“Nothing from the government is ever completely free.”
“He killed the golden goose with his car, ran over it. (on cashing out early)”
“The most important variable in this entire program is not the S&P 500 ... It's by your dinner table.”
“Never act on an unsolicited call, text, or link about your kid's Trump account.”
Takeaways
- 1 Trump accounts (IRC 530A) are investment accounts for any child under 18 with a Social Security number. They hold only low-cost US index funds (the default is the S&P 500), with fees capped at 0.10%. At 18 they become a traditional IRA in the child's name.
- 2 There are three sources of free money: a $1,000 government seed for US-citizen babies born 2025-2028 (you must opt in); $250 from the Dell pledge for kids born 2016-2024 in zip codes with median income up to $150K; and up to $2,500 a year tax-free from an employer, within a $5,000 yearly cap. Big families gain the most.
- 3 Be honest about projections. The government site shows $1,000 growing to about $243K by 55; Morningstar's model shows about $38K. Regular contributions, not the seed, are what build real money ($20 a month gets to about $15K by 18).
- 4 The catches: withdrawals are taxed as ordinary income, there's a 10% penalty before 59½ (except for education or up to $10K toward a first home), withdrawals are pro-rata, and it likely counts against financial aid. For tuition a 529 is better; for a working teen, a custodial Roth IRA.
- 5 Business owners: a $2,500 tax-free contribution per employee's child feels like a $3,000+ raise. A 15-person shop can offer the same benefit as Goldman Sachs, and it's a strong hiring line.
- 6 The advanced play: the low-income years after 18 (yeshiva, seminary, first year of college) may be a cheap window to convert to a Roth, then decades of tax-free growth. The rules are still being finalized, so run it past a professional.
- 7 The biggest risk is "leakage": in Morningstar's simulations, many accounts were emptied by 27 because kids cashed out. Teach children what money is for, starting around age 6-10. $50K left alone could become about $500K by 55.
- 8 Scams are already circulating. Official emails come from trumpaccounts.treasury.gov, but the safe rule is to ignore unsolicited contact and go to the site or app yourself.