Trump Accounts Revisited: Don’t Pass Up Free Money

A few months ago, I wrote about Trump Accounts when many of the details were still unknown. The accounts officially became available on July 4, so we now have a better understanding of how they work.

Think of a Trump Account as a starter retirement account for a child. It is not a college savings account or an account the child can freely spend when they turn 18.

Here are the important points.

1. Some children qualify for free money.

Children born from 2025 through 2028 may qualify for a one-time $1,000 federal contribution.

The Michael and Susan Dell Foundation has also pledged a separate $250 contribution for eligible children age 10 and under who live in Zip codes with a median household income below $150,000.

Some employers are also beginning to offer Trump Account contributions as an employee benefit.

None of this money arrives automatically. An account must first be properly established.

2. The parent normally opens the account.

In most cases, the parent or legal guardian opens the account. To claim the federal $1,000, the person opening it generally must be the person who claims, or expects to claim, the child on a tax return.

Grandparents and other relatives may contribute once the account is open, but they generally cannot open a separate account for the child when a parent or guardian is available.

3. Start at the government website.

The opening process has three basic steps:

1. 1. Begin at TrumpAccounts.gov.
   2. Submit IRS Form 4547 using the official app, an IRS online account, or with a tax return.
   3. After approval, activate the account at TrumpAccount.com.

New accounts are initially administered through Robinhood. You cannot presently open the original account directly at Schwab, Fidelity, or Vanguard, although transfers to those, or other firms may eventually become available.

4. Families can contribute up to $5,000 annually.

Parents, grandparents, and others may contribute, but total private and employer contributions generally cannot exceed $5,000 per child per year.

An employer may contribute up to $2,500, but that amount counts toward the $5,000 limit.

Family contributions are not tax-deductible. The investment growth is tax-deferred, not necessarily tax-free.

5. The money is invested in stocks.

During the child’s early years, the investment choices are limited to low-cost funds holding primarily American stocks. The current default investment tracks the S&P 500.

That gives the account significant long-term growth potential, but its value will rise and fall with the stock market.

6. This money is intended for retirement

Withdrawals generally cannot be made before age 18.

At age 18, the account becomes a traditional IRA under the child’s control. Withdrawals may then be taxable and may also face the traditional IRA 10% early-withdrawal penalty unless an exception applies.

That makes a Trump Account much less flexible than a 529 college plan or an ordinary investment account.

My Take

Claiming the available federal, Dell, or employer money should be the first priority. Free money is difficult to argue with.

Whether parents or grandparents should make substantial additional contributions is a separate question. If the main objective is education, a 529 plan will often provide greater tax benefits and flexibility. A Trump Account makes the most sense when the goal is to give a child an exceptionally early start on retirement savings.

Fun Fact: If a newborn receives the government’s $1,000 contribution and it earns an average return of 10% per year for 65 years—without anyone ever adding another dollar—it would grow to approximately $490,000. While no one can predict future investment returns, it’s a remarkable illustration of the power of compounding over a lifetime.

*Rules and procedures are current as of July 2026.

Ask if You Dare: Best Ways to Determine Longevity

When it comes to longevity and aging, I increasingly remind myself of the following: “Growing old is mandatory. Growing dull is entirely optional.” I try my best to keep it interesting, and make it a point to learn something new every day.

When it comes to retirement planning, you can’t avoid making a guesstimate about how long your money needs to last. One of my fancy retirement planning software programs politely uses the term “end of plan” to describe that important ending date. I don’t think they’re fooling anyone.

You may, for any number of reasons, including retirement planning, decide you want to take a more careful look at your expected longevity. The standard numbers for those retiring at age 65 look like this: The average male has 18.4 years of life expectancy remaining while the average female has 20.8 years. That’s based on the CDC’s final 2024 mortality data.

If you want to get further into the weeds, and possibly more exact for you personally, you could peruse the website longevityillustrator.org, which is very helpful in forecasting the combined life expectancy of a husband and wife. My wife is seven years younger than I am, so she has a much higher chance of living 30 years past my retirement age than I do. Based on that website, the conservative approach would be for my wife and me to plan our lives out for 35 years from next year. By the way, my wife is a buzzsaw when it comes to her career, so retirement is not in our cards anytime soon.

If you wonder how your personal health information and family history influence your life expectancy, then try Livingto100.com, which gets really detailed. I just ran through it this week, and it gets into everything from sleep to family history to whether you floss your teeth. Unfortunately, you do have to set up a free account before it will give you the estimate.

If you just want to keep it really basic, you can simply go to the Social Security Administration and type in your gender and age. By way of perspective, the Living to 100 website gave me 10 more years than the basic Social Security website.

Most retirement planning predictions are based on a 30-year retirement period. With the profound advancements in medicine and personal health in recent years, I expect life expectancies to continue to rise. In 2006, there were estimated to be 58,600 Americans over the age of 100. Just 18 years later, in 2024, that number had grown to 101,000. That’s a 72% increase.

When it comes to longevity and retirement planning, you can be general or more specific. The ball is in your court.

Fun Fact: The city known for the greatest longevity in the United States is likely Loma Linda, California. It’s one of the original “blue zones,” and both Honolulu, Hawaii, and San Jose, California, are close behind. Interestingly, Loma Linda is home to a large Seventh-day Adventist population, and the lifestyles of that population are consistent with longer lives—plant-based diet, no smoking, almost no alcohol and a commitment to rest and work detachment on the Sabbath. On average, men lived 7.3 years longer and women lived 4.4 years longer than comparable Californians.

Want to Move? Make Sure You Understand the State Tax System

As all of us Michiganders know, during our working years, we’re typically subject to a 4.25% state income tax. When you write that check for the tax payment, particularly in January or February, one can’t help but dream about moving to a sunshine state like Florida, which is warmer in January and has no state income tax. Just remember, things are never as simple as they might appear. Understanding a bit about state tax systems will help you determine what your real tax liability might look like on a big move.

A bit of history might be helpful. Since 1902, state tax systems have changed dramatically. Property and license taxes were once much more important, but over time states added income taxes, sales taxes, fuel taxes, tobacco taxes, alcohol taxes, and other revenue sources. Major events like the Great Depression, World War II, the end of Prohibition, and more recent economic shocks all pushed states to adjust how they raise money.

This history is worth remembering because many people focus mainly on state income taxes when thinking about where to live in retirement. Both Texas and Florida are known as two of the country’s no-income-tax states, but they are also the most consumption-tax-reliant states in America. On the other hand, states like California, New York, Massachusetts, and Connecticut rely heavily on individual and corporate income tax collections to fund their governments.

Across all states, the two largest sources of state tax revenue are personal income taxes and general sales taxes. Personal income taxes account for 32.6% of total state tax revenue, while general sales taxes account for 31.7%. Florida is an extreme example of the sales-tax approach, relying on the general sales tax for 63.5% of its state tax revenue. Michigan, by contrast, has a more diversified state tax collection system, combining individual income taxes, general sales taxes, corporate and business-related taxes, fuel taxes, tobacco taxes, and other selective excise taxes.

You may wonder how Florida can raise enough government revenue without an income tax. After all, while both Michigan and Florida rely on a sales tax, Michigan also has an income tax. There are a few reasons Florida can make that work. First, Florida effectively exports part of its tax burden to non-residents through general sales taxes paid by its many visitors — think Disney, cruises, conventions, and beach tourists. In addition, many Rust Belt states, including Michigan, have higher legacy costs tied to retiree obligations, aging infrastructure, and long-established public pension systems. Florida has lower public pension obligations and generally spends less on certain social programs.

So, if you are considering a possible move from an income-tax state like Michigan to a no-income-tax state like Florida, remember that taxes will still pop up. They will affect you, and they may also affect your winter visitors who are trying to get out of the cold. When those visitors come, they/you will spend on food and fun activities, and that spending will be taxed. And if you are retiring to Florida, all that free time may lead to more taxable spending of your own — including golf, which, by the way, may be worth every dollar of tax.

The larger point is that every state needs revenue; the difference is not whether residents pay taxes, but how and when those taxes are collected.

Fun Fact: One of the more unique taxes in the world may be Japan’s “bathing tax.” In certain hot spring areas, visitors can be charged a small local tax for using an onsen, or hot spring bath. For example, Niseko Town lists a bathing tax of 100 yen for one-day bathing and 150 yen for an overnight stay. So yes, in some places, even taking a relaxing bath can be a taxable event.