Trump Accounts Explained: A New Way to Build Generational Wealth From Childhood

Protecting and Preserving Wealth Episode 80 – The New Trump Accounts and What They Will Do

Speakers: Jon Gay, Bruce Hosler, Jason Hosler, & Alex Koury

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Jon Gay (00:05):

Welcome to Protecting and Preserving Wealth. I’m Jon Jag Gay, joined as always by Alex Koury, Jason Hosler, and Bruce Hosler of Hosler Wealth Management. Hello, gentlemen.

Bruce Hosler (00:12):

Good morning.

Jason Hosler (00:13):

Good morning, Jon.

Alex Koury (00:14):

Hi, Jon, good morning.

Jon Gay (00:15):

This is like Charlie’s Angels, I say good morning and everybody says good morning (laughs).

Alright, today we’re talking about Trump Accounts. Obviously, our listeners are probably familiar with Roth accounts. We’re talking about Trump Accounts, which is a new entity. So, Bruce, how do we start here?

Bruce Hosler (00:28):

So, these came out of the OBBBA, and that’s why I wanted to talk about them today. You can’t actually set one up yet, they’re going to be set up in July of 2026, is when the first ones will be set up. Children that are born I believe starting in January of ‘25, all the way through December 31st of ‘28 will receive $1,000 contribution from the federal government to be made and set up this Trump Account.

What I’m mostly excited about is we’re going to have a whole new generation of capitalists because can you imagine these kids when they turn 18 to 20 years old, if they have an account that’s worth perhaps as much as $300,000, that is just amazing.

Jon Gay (01:13):

The side note here, Bruce, is a big topic lately has been the need for educating high schoolers and middle schoolers and kids, this would be one way to do it, you’ve got this money to play with now.

Bruce Hosler (01:26):

Right, right. And really, we just want to bring the awareness of these accounts to our clients and I realize, for example, I don’t have any grandchildren of that age, but I have grandchildren that are still under 18, and they can have these accounts set up for them after July 4th, 2026.

What do I do as a grandparent? What do I do as a parent if I want to set up one of these accounts? I want to make our listeners aware of this that it’s coming so they can begin to prepare for it.

Jason Hosler (01:57):

This is a very interesting proposal from a policy perspective because not only are all the children born over the next four years during the Trump administration here are going to be having that initial $1,000 deposit, but you’re also going to be able to have all the kids under 18 have eligibility to be able to participate in these accounts. I think this is going to create much more widespread participation for minors, and not under the previous rules.

A lot of the other accounts that parents or grandparents have access to for minors are restricted in some way used for education, the Uniform Transfer to Minors Act accounts have different types of restrictions, and there’s still a lot of unknowns about this. How some of the tax reporting’s going to be made, how the accounts are actually going to be established themselves, are there going to be rollover options to retirement accounts-

Bruce Hosler (02:57):

Or Roth conversion options.

Jason Hosler (03:00):

Even Roth conversion options, which could be very powerful when you think about it, especially based on some of the projections that the White House has put out. All of that together is invested in America because the limitation is that you have to invest in a US-based American Stock Index.

So, most of our listeners will be familiar with the Dow Jones or the S&P 500, but we would assume that that’s likely to include the NASDAQ 100, the Russell 2000, maybe even the Wilshire 5000, which is like a total stock market index. Those are all very popular indices and the investment in American companies by American citizens like Bruce says, makes all of these children budding capitalists.

Alex Koury (03:47):

So, if you think about it, again, the tools available today, they’re good tools, everyone generally knows about custodial accounts, 529 accounts, et cetera, but this is going to be another add-on. If you think about just time value of money, if you can help your children, and I think about this for my own daughter to be quite honest.

It’s do I want her to struggle with money in the future when there’s probably other problems that she could be worrying about or focusing on in some of the way we help the world. We give that our kids a head start this way and save now. You save less over many, many years, over many, many decades, results in more money, compounding effect really works in that way.

And I think about how legacies are built, how families of great wealth are built over not just years, but over decades and centuries and generations. You know this is opportunity for everyone to get a chance to get their foot in the door, have this initial account set up for them if your kids are under the age of 18, and start contributing and start thinking about their future as well, and we can make a big difference across this country.

And like Bruce says, raise new capitalists, raise new people in a new way to think about money differently versus waiting until you’re 18 to get involved. Get involved now, and as Jason was saying, we’re investing in US-based companies, that’s a big, big vote of confidence for America too.

Bruce Hosler (05:11):

Guys, here is the big differentiator of Trump Accounts, and this is what everybody needs to realize. Prior to Trump Accounts, children were not qualified to set up or open an IRA or a Roth IRA unless they met the requirement of earned income. They have to have earned income. And so, an IRA or a Roth IRA (one being tax deferred and the other one being tax-free), those types of accounts were not available for children and most children don’t really start working until 16, 17, 18.

So, you’ve got 16 to 18 years there of tax deferred growth that you’re not taking any money out, that you’re letting that account grow and become something, that now all of a sudden, children without unearned income can set up a tax deferred account and grow something big toward the future. This is an amazing breakthrough. It has never been available in the American system to have this tax deferred account.

And when they turn 18, essentially, it becomes a traditional IRA and subject to all of those rules. Well, here, they have had 18 years to be able to do that, and imagine if parents or grandparents or your employer (think about that) can contribute $2,500 to this, the parents or the grandparents can put up to $5,000 a year into one of these accounts, and every, year they’re growing compounding $5,000 a year and growing.

This could be an amazing opportunity for kids to become interested in their own account and interest, and learn how tax deferred growth and how the time value of money works. It is an amazing change from anything else that we’ve ever had before.

Jason Hosler (06:57):

I would also like to point out that the employers who are making that annual contribution to a Trump Account, that contribution does not impact the employee’s taxable income. So, employers are going to be able to offer this as a benefit to their employees that they’re making contributions to Trump accounts that goes towards the kids, the parents don’t have to count that in their income that year.

Jon Gay (07:18):

And in an economy that’s been up and down a lot in these last few years, if that gives an employer another edge when they’re trying to recruit top talent, there you go.

Bruce Hosler (07:27):

Absolutely. And this $5,000 is indexed for inflation. So, starting in 2026, it’s $5,000, but every year after that, it’s indexed. So, as the inflation goes up, there’ll be able to be more money put away in one of these accounts.

Alex Koury (07:42):

That’s a big deal. I think the other interesting deal is that last week, it was announced that Michael Dell and his wife made a big, big pledge to give money philanthropically to potentially help fund these types of accounts and or get this jump started. Well, that could be just this tip of the iceberg. I think there is a recognition among those that are the wealthiest in our country of trying to find ways to give money back.

This could be a good way to, again, talk about a little bit of redistribution of wealth because they get a tax break for it, it’s a charitable deduction for them, but also feeds those that again, can benefit from having these stats and just getting these things funded and making it more of a national attention issue, not just something that’s been kind of swept under the rug for so many years because, well, you don’t fund these accounts, obviously now is a way to actually give back to Americans as well.

Bruce Hosler (08:36):

Well, it’s interesting, Alex, that you say that because you just introduced a new concept. Michael Dell introduced a concept that the American people didn’t know, and that it’s not in the law so far that we know. If you give money to the government, is that a taxable donation?

Well, normally, you pay taxes. Well, Michael Dell’s giving $6 billion (him and his wife, $6 billion) and they’re going to take a charitable donation because this is going into the Trump Accounts. So, now we know something new that there is a charitable donation available for people that want to give to these Trump Accounts for multiple recipients.

Now, I don’t know if there’s going to be some limitation of, well, if you give to your grandchildren, do you get a deduction for that? Oh no, they’re related to you, or is it just because you gave it to everybody as a whole?

They’ve got to figure out, there’s a lot of regulations we got to understand here, but there could be some very cool laws that come out of this. Hey, that’s charitable if you give to the Trump Account fund or whatever, and it goes to a bunch of children, then you can take a charitable donation on that. That is very cool.

Jon Gay (09:47):

Bruce, do you mean charitable deduction or donation?

Bruce Hosler (09:50):

Charitable deduction and a charitable donation. So, you made a charitable donation that qualifies for the deduction. And so, it’s both of them really, you’re doing both, but the deduction is what I was interested in there.

The next thing that I want to point out is that it doesn’t have to be just the parents, grandparents can be doing this. What a legacy that you’re leaving for your grandchildren by funding their Trump Account every year while they’re growing up.

And I have grandchildren that are not born in ‘25, they’re older, they’re already 3, 6, 7, 9. I’m looking forward to being able to help fund their Trump Accounts and help them understand and look at their accounts and learn about money

Alex Koury (10:34):

Allowing opportunity for wealthy Americans to get these charitable deductions and give money philanthropically. Again, they don’t sell assets, they have ways and there are ways within many different levels of wealth to avoid the taxation of your assets and pass more on to your own heirs and beneficiaries, whatever have you.

Maybe part of that problem has been that these wealthier Americans, they just don’t want to pay the taxes to the government. They think there’s other better, useful ways to give their money away, and this could be that one of those opportunities to do that, think about it that way. No one wants to pay their taxes any longer, they’d rather give the money to the causes they feel are most impactful and based on their own values system.

Bruce Hosler (11:15):

Very good. I want to point out- there’s a couple laws that are kind of important. So, distributions after age 18 follow the IRA withdrawal rules, but here’s an important one. Before the first day of the calendar year in which the child turns 18, contributions must be invested in low-cost mutual funds or exchange traded funds that track the S&P stock index or another index comprised primarily of US companies.

So, here’s the point; if your child is born in June, you don’t wait until June, the year they turn 18. You have to do it the year while they’re still 17 before January 1st comes along. And you think, “Well Bruce, that’s not going to be for a while.”

Well, excuse me, when we get into 2026 in July 4th and they open up these accounts and you can start funding that, if you have a 17-year-old, you want to be sure and fund that before December 31st of that year because the year next year, that kid turns 18, you can’t fund that Trump Account.

So, these are just some rules that I want to make sure we’re bringing to the listeners, and we’re going to bring more information on this as it becomes clear, but I’m bringing this awareness now. I want to because these are going to be very cool accounts.

Your kids don’t have to have earned wages, they can have a Trump Account, it can grow tax deferred, it can grow big, it can be a game changer, and certainly, it can help teach them about money, saving money, time value of money, and growing wealth and learning how to save.

We’re an instant gratification society. Isn’t this a great lesson to teach kids, hey, this is money that you never touch. Even though it’s yours and you could touch it, you don’t because it’s growing tax deferred, what a great concept.

Jason Hosler (13:05):

Well, and there’s no withdrawals allowed until they reach the age 18 as well. So, that lesson in delayed gratification is forced on all those children. At 18, then they’re going to be making their own decisions and we know 18-year-olds don’t always make the best decisions, but there’s going to be a percentage who are going to be able to continue to save and watch this account grow and put it towards the retirement.

There’s going to be those who are going to school who this will help them out, there’s going to be those who need to buy a house or some other type of need that they have where this is going to come into play.

Bruce Hosler (13:42):

Well, and Jason, I mean an 18-year-old or a 20-year-old going to school or buying a house or buying a car, how much wages and income do they have? So, it’s not totally terrible that they take it out and their income is low. But here’s the problem, there’s a 10% early withdrawal penalty that applies if you’re less than 59 and a half.

So, there’s still a disincentive to take that out early. Even though your income may be low, there’s an incentive to keep it and let it work toward retirement.

Jon Gay (14:12):

Well, Bruce, I know you literally wrote the book Moving to Tax-Free, so I appreciate that you and the team are staying abreast of all these new developments even before we know how all of it’s going to shake out. I know we’re going to do future episodes, I’m sure, throughout 2026 as we get more information on these Trump Accounts.

In the meantime, if one of our listeners or viewers wants to talk to you or your team at Hosler Wealth Management about anything related to their financial future, what are the best ways to find you?

Bruce Hosler (14:35):

Well, Jason, they can call us at Prescott where?

Jason Hosler (14:37):

(928) 778-7666

Bruce Hosler (14:40):

In Scottsdale, Alex, if they want to call you, where do they call?

Alex Koury (14:44):

(480) 994-7342.

Bruce Hosler (14:48):

And folks, of course, you can always reach us on the website, hoslerwm.com. There’s a place in the top right that you can schedule an appointment, and we can get with you and help answer your questions.

Jon Gay (14:58):

Always appreciate the time, gentlemen. We’ll talk again soon.

Bruce Hosler (15:00):

Thanks.

Jason Hosler (15:01):

Thanks, Jon.

Alex Koury (15:01):

Thanks Jon.

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Disclosure: (23:50):

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