tax strategies Archives

Trump Accounts: A Complete Guide to Retirement Savings for Children

May 21, 2026

We’re approaching a significant milestone in the history of financial planning. July 4th, 2026, marks the one-year anniversary of the One Big Beautiful Bill Act. This presents a unique planning opportunity that many families are just beginning to understand: Trump Accounts.

If you’re a parent or grandparent thinking about your children’s financial future, or if you’ve reached a point where you want to practice legacy planning with a “warm hand” instead of waiting until you’re gone, Trump Accounts offer an entirely new approach to retirement savings for minors.

The timing couldn’t be more relevant. Many families who have achieved financial independence are now looking beyond their own retirement security toward setting up the next generation for success. Trump Accounts offer something that hasn’t existed before. A way to start retirement savings for children without the traditional barriers that have limited options in the past.

What Are Trump Accounts and How Do They Work?

Trump Accounts are a result of the One Big Beautiful Bill Act signed into law on July 4th, 2025. While the full economic impact of this legislation is still unfolding amid ongoing global conflicts that are affecting oil prices and inflation, the tax benefits have already begun helping many families. Think of Trump Accounts as traditional IRAs specifically designed for minor children. But they come with some important differences that make them accessible in ways that traditional retirement accounts are not.

The fundamental concept is straightforward. Trump Accounts allow you to make tax-deferred investments on behalf of children under 18, regardless of whether they have earned income. This removes the biggest barrier that has historically prevented families from starting retirement savings for children early. Traditional and Roth IRAs require earned income, so most young children can’t participate. Trump Accounts change that equation entirely.

The money you contribute grows tax-deferred, similar to a traditional IRA, but with some unique features. Individual/family contributions are made with after-tax dollars, similar to non-deductible IRA contributions. The account remains under custodial management until the beneficiary reaches 18 years old. At that point it converts to a traditional IRA in their name.

Setting Up Child Retirement Accounts: Rules and Requirements

Understanding the rules for Trump Accounts is essential before you decide whether they fit into your family’s financial strategy. The beneficiary must be under 18 years old and have a valid Social Security number. Only parents or legal guardians can open and manage these accounts as custodians. Grandparents, family members, and friends can contribute to existing accounts.

One important limitation: there can only be one Trump account per beneficiary. Unlike 529 plans, which allow multiple accounts for the same child, Trump Accounts follow a one-per-person rule. This means coordination becomes important if multiple family members want to contribute.

The contribution structure offers some interesting opportunities. The total annual contribution limit for 2026 is $5,000 per beneficiary. However, there’s an additional opportunity through employer contributions. If you’re a business owner or your employer participates in the program, up to $2,500 can be contributed on behalf of an employee’s Trump Account. That contribution counts toward the $5,000 total limit. This means you could potentially contribute $2,500 that is tax-deductible for the business, plus another $2,500 from personal after-tax income.

Several major companies have already committed to offering Trump account contributions as employee benefits. There are roughly 60 companies that have pledged to make contributions on behalf of their employees or employees’ beneficiaries. These include:

Bank of America
BNY Mellon
Schwab
BlackRock
Chase
Wells Fargo
Broadcom
Coinbase
IBM
Dell
NVIDIA

There’s also a special “pilot contribution” opportunity. The U.S. Treasury Department will provide $1,000 in seed funding for Trump Accounts opened for children born between 2025 and 2028. This free money doesn’t count against your $5,000 annual contribution limit, making it an attractive starting point for eligible families.

Investment Options for Trump Investment Accounts

The investment choices for Trump investment accounts are deliberately simple and conservative. You won’t find cryptocurrency options, individual stocks, or complex investment vehicles. Instead, Trump investment accounts are restricted to broad-based index funds and ETFs that focus primarily or exclusively on U.S. equities. While this might seem limiting, it actually aligns well with long-term wealth-building strategies. Think of time in the market as opposed to timing the market.

For most families just getting started with long-term investing, sophisticated investment options aren’t necessary. The power of Trump Accounts lies in time and compounding, not complex investment strategies. Having decades for money to grow in broad market index funds has historically been one of the most reliable wealth-building approaches available.

BNY Mellon will initially manage the accounts through its infrastructure, while Robinhood will handle account custody. While you won’t be able to open Trump Accounts directly through traditional brokerages like Schwab or Fidelity initially, these options will likely become available as the program matures and compliance requirements are established.

Understanding Liquidity and Long-Term Implications

One of the most important aspects of Trump Accounts is understanding when and how funds become accessible. There is no liquidity until the beneficiary reaches 18 years old (or 21 in some states, depending on the age of majority). This is a significant consideration that differentiates Trump Accounts from other savings options.

Once the beneficiary reaches the age of majority, the Trump account automatically converts to a traditional IRA in their name. At this point, traditional IRA rules apply. This includes the 10% early withdrawal penalty for distributions before age 59½, as well as ordinary income taxes on any growth. The original after-tax contributions can be withdrawn without additional taxes, but tracking this basis becomes crucial for tax purposes.

There are some exceptions to the early withdrawal penalties, similar to traditional IRAs. Qualified education expenses, first-time home purchases, and certain hardship situations, such as disability or unemployment, may allow penalty-free withdrawals. However, ordinary income taxes would still apply to the growth portion.

One unique feature is the option to roll Trump account funds into an ABLE account when the beneficiary turns 17, if the child has a qualifying disability. ABLE accounts allow individuals with disabilities to save money without affecting their eligibility for federal benefits like Supplemental Security Income. This option provides important protection for families dealing with special needs planning.

Trump Accounts vs Other Retirement Savings for Children Options

When you evaluate retirement savings strategies for children, you need to consider Trump Accounts alongside other established options. The most popular alternative is the 529 education savings plan, which offers some significant advantages that Trump Accounts cannot match.

529 plans provide state income tax deductions in many states, something Trump Accounts do not offer. The money grows tax-free, and when used for qualified education expenses, distributions are completely tax-free. Recent changes have expanded 529 flexibility, allowing up to $20,000 annually for K-12 private school expenses and enabling 529-to-Roth IRA rollovers under specific conditions.

The 529-to-Roth IRA rollover option is particularly powerful. After a 529 account has remained open for 15 years, you can roll up to $35,000 into a Roth IRA for the beneficiary over time, subject to annual IRA contribution limits. This provides a tax-free path to retirement savings that Trump Accounts cannot match, since conversions from Trump Accounts to Roth IRAs would be taxable events.

Custodial brokerage accounts (UTMA/UGMA accounts) offer another alternative with complete investment flexibility and no contribution limits beyond annual gift tax thresholds. These accounts don’t provide tax-deferred growth. They offer capital gains tax treatment rather than ordinary income tax treatment, and can be used for any purpose without penalties. The trade-off is that the child gains full control at 18 or 21, which may or may not align with your comfort level.

For families with children who have earned income, Roth IRAs remain an excellent option. A working teenager can contribute to a Roth IRA and potentially receive decades of tax-free growth. The combination of a Roth IRA for earned income plus a Trump account for additional savings could provide a powerful one-two punch for families with the resources to fund both.

Comparing Retirement Savings for Children Strategies: A Prioritization Framework

When deciding how to prioritize different retirement savings options for children, consider your family’s specific goals and circumstances. If education funding is a primary concern, 529 plans should typically be the first option. The tax advantages, flexibility for K-12 expenses, and the 529-to-Roth IRA rollover option make them superior for most families focused on education costs. Additionally, you can transfer an unused 529 to that adult child, who can ultimately use it for a future child’s education expenses.

For families who have already addressed education funding or have additional resources, custodial brokerage accounts often offer more flexibility than Trump Accounts. The ability to use funds for any purpose without penalties, combined with more favorable capital gains tax treatment, makes custodial accounts attractive for families comfortable with transferring control to their children at the age of majority.

Trump Accounts might make the most sense as a third-tier option, particularly for families with children born between 2025 and 2028 who can take advantage of the $1,000 pilot funding. The accounts also become more attractive if your employer offers contribution matching or if you’re a business owner who can take advantage of the tax-deductible employer contribution option.

One alternative approach that deserves consideration is to overfund your own taxable brokerage account for the purpose of using it for lifetime gifting and legacy purposes. This strategy maintains your control over the assets while providing flexibility to make gifts when your children or grandchildren actually need financial support, whether for

Education
Home purchases
Business ventures
Other life goals

When you pass away, those assets can receive a step-up in cost basis, making it one of the most powerful legacy buckets available.

Tax Considerations and the Kiddie Tax Impact

Understanding the tax implications of Trump Accounts requires familiarity with “kiddie tax” rules, which can significantly impact the effectiveness of certain strategies. The kiddie tax applies to the unearned income of children under 18 (or to full-time students under 24 who don’t provide more than half of their own support).

For 2026, the first $1,350 of unearned income is tax-free. The next $1,350 is taxed at the child’s rate (likely very low). Any unearned income above $2,700 is taxed at the parents’ marginal tax rate. This becomes particularly relevant when considering Roth conversion strategies once Trump Accounts convert to traditional IRAs.

Many online discussions suggest that converting funds from a Trump account into Roth IRAs after age 18 represents a significant planning opportunity. However, the kiddie tax rules can make this strategy less attractive than it initially appears. If the beneficiary still qualifies as a dependent on their parents’ tax return, the parents’ higher marginal tax rates could apply to large Roth conversions instead of the child’s lower rates.

More effective conversion opportunities may arise after the child graduates from college and begins working independently. They will not be subject to kiddie tax rules and can take advantage of their own lower tax brackets. However, at that point, the decision belongs to the child, not the parents who originally funded the account.

Are Trump Accounts Right for Your Family?

Trump Accounts represent a new tool in the family financial planning toolkit. Still, they’re not necessarily the best tool for every situation. They work best for families who have already addressed their primary financial goals:

Retirement security
Education funding for their children
Other immediate financial priorities

The accounts make the most sense when viewed as part of a comprehensive approach to lifetime legacy planning rather than as a standalone solution.

If you’re in a position where you’ve achieved financial independence and are looking for additional ways to benefit your children or grandchildren, Trump Accounts can play a role, particularly if you can take advantage of the pilot funding or employer contribution opportunities.

However, liquidity restrictions, ordinary-income tax treatment, and limited investment options make Trump Accounts less flexible than alternatives such as 529 plans or custodial brokerage accounts. The conversion to a traditional IRA at age 18 does provide some planning opportunities. These need to be weighed against the immediate benefits available through other savings vehicles.

For most families, a prioritized approach makes sense:

529 plans for education funding
Roth IRAs for children with earned income
Consideration of Trump Accounts or
Custodial brokerage accounts for additional savings goals

The key is to understand how each option fits into your overall family financial strategy, rather than viewing any single account type as a complete solution.

The introduction of Trump Accounts adds another option to consider. Still, the fundamentals of long-term wealth building remain the same:

Start early
Invest consistently
Give time and compounding the opportunity to work

Whether you choose Trump Accounts, 529 plans, custodial accounts, or a combination of strategies, the most important step is starting with a plan that matches your family’s goals and comfort level.

Need More Guidance?

At Imagine Financial Security, we help individuals over 50 who have at least $1 million saved navigate these complex retirement decisions. If you are looking to

Maximize your retirement spending
Minimize your lifetime tax bill
Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel. This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Kevin Lao

May 21, 2026

End of Year Tax Planning: Your Complete Guide to Maximizing Savings

November 20, 2025

Happy Thanksgiving! As we approach the final stretch of 2025, it’s the perfect time to focus on what could save you thousands of dollars: end-of-year tax planning. If you’re in that sweet spot of being 50-60+ years old with substantial savings (we’re talking seven figures or more), this guide is specifically for you.

The difference between tax planning and tax preparation is huge.

Tax preparation is reactive. You collect your 1099s in January, hand them to your CPA, and ask how to minimize your taxes from last year. Unfortunately, there’s not much you can do at that point.

Tax planning, on the other hand, is proactive. It’s about looking at your complete financial picture and figuring out how to minimize your lifetime tax burden, not just this year’s bill.

Understanding 401(k) Contribution Limits 2025 and Deadlines

Let’s start with the low-hanging fruit: contribution limits. These are opportunities you absolutely don’t want to miss, especially with some exciting changes coming in 2025.

Employee Contribution Deadlines

For 401(k) contributions, the employee deferral deadline is December 31st. There are no extensions to this deadline. For 2025, the employee contribution limit is $23,500, plus a $7,500 catch-up contribution if you’re over 50. That means you can contribute up to $31,000 through payroll deductions, but only if you act before year-end. If you are behind, consider using end of year bonus income, or even deferring most (if not all) of your final few paychecks. This assumes you have some cash on the sideline to use for the holidays!

The total contribution limit for 2025 is $70,000, including employer matching and profit-sharing. The catch-up contribution is the same at $7,500. If you are using Mega-Backdoor Roth 401k contributions or perhaps you are self employed using Solo 401k or SEP IRA, you can really juice up your savings over and above the employee deferral limits.

IRA Contributions: More Flexibility

Unlike 401(k) employee contributions, IRA contributions can be made up to the tax filing deadline. For 2025, you can contribute $7,000 to a traditional or Roth IRA. Note: That’s a combined limit, not per account, plus $1,000 catch-up if you’re over 50.

This flexibility is valuable when you’re not sure about your modified adjusted gross income or whether you’ll need to do a backdoor Roth conversion. Your modified adjusted gross income will determine whether or not that IRA contribution is deductible for you and whether you are eligible to contribute to a Roth IRA.

Solo 401(k) vs SEP IRA: Self-Employed individuals

If you’re self-employed, you have some powerful options. A SEP IRA allows contributions of 25% of earnings up to $70,000 for 2025, and you can delay opening the account until your filing deadline.

However, I’m seeing more clients choose Solo 401(k)s these days. The real advantage is that you’re not limited by the 25% of earnings rule for the employee portion.

With a solo 401(k), you can contribute the full $23,500 employee contribution regardless of your income level, then add employer matching and profit-sharing to reach that $70,000 maximum. Plus, many solo 401(k)s offer the mega backdoor Roth option, allowing after-tax contributions that can be converted to a Roth immediately. You must enroll in the Solo 401(k) before the calendar year is over, but you can delay funding the account until you file your tax return.

The Super Catch-Up: A Game-Changer for 2025

Here’s something exciting: if you’re turning 60, 61, 62, or 63 in 2025, you qualify for a “super catch-up” contribution. This adds an extra $3,750 to your regular catch-up, bringing your total catch-up to $11,250.

That means if you’re in this age range, you can contribute $34,750 to your 401(k) in 2025 ($23,500 regular + $11,250 super catch-up). No surprise, the IRS decided to make this complicated, and this benefit disappears when you turn 64.

Smart Tax Bracket Management Strategies

Effective tax planning starts with understanding your current and future tax brackets. This is where the real strategy comes in.

Legislative Changes

It’s official, OBBBA (One Big Beautiful Bill Act) was passed in July, making the current TCJA tax brackets permanent! This means you probably don’t need to panic about converting everything to Roth before 2025 is up. With that said, some key considerations directly impact all of you, whether you are planning for or already in retirement.

Tax Brackets are Permanent

Sure, nothing is ever set in stone. However, it will now require NEW legislation to change the current tax brackets. Originally, the 2017 Tax Cuts were set to expire after 2025.

Friendly reminder: Never implement planning strategies based on what you THINK policy makers will do to the tax code. Regardless, you can now rest easy knowing that the tax brackets are set at:

Standard Deduction Inflated

There was a slight uptick in the original 2025 standard deduction amounts. For singles, you are eligible for a $15,750 standard deduction. For married filing jointly, you are eligible for a $31,500 standard deduction.

Senior Bonus Deduction

If you turn 65 or older before year’s end, you are now eligible for an additional $6k as a BONUS deduction. This is in ADDITION to the standard deduction, but also IN ADDITION to the current bonus deduction of $2k for singles and $1,600 each for married filing jointly. Therefore, a married couple could theoretically receive a tax deduction up to $46,700 for 2025! With that said, the new bonus deduction is NOT permanent. After 2028, this goes away. Additionally, there are income phaseouts, so if you earn too much, you might not receive any or all of that senior bonus deduction.

Charitable Giving Incentives

Currently, if you do not itemize your deductions, giving to charity does NOT provide you with any tax incentive. Of course, if you do give to charity, reducing your taxes is probably not the ONLY reason you do so. However, starting in 2026, for those taking the standard deduction, you can still take a $1k tax deduction for singles and $2k for married filing jointly for making charitable donations. Therefore, if you are making some smaller donations and typically don’t itemize, make sure to keep those receipts for 2026 and beyond so you can take advantage of this tax deduction.

Healthcare Tax Credits

Prior to 2021, only those taxpayers whose Modified Adjusted Gross Income was between 100% and 400% of the Federal Poverty Line could be eligible for tax credits when purchasing a health insurance policy on the exchange. However, in 2021, COVID relief enhanced those tax credits even if your income exceeded 400% of the Federal Poverty Line. Starting in 2026, we will revert to the old rule, making it that much more important for “early retirees” to dial in their modified adjusted gross income before becoming Medicare eligible. Here is a video on my YouTube channel that highlights how these tax credits work for early retirees. I do assume a scenario for 2025 with the “gradual phase out” of the credits, but it still may be helpful to understand how it is calculated. 👇
Will I Receive Tax Credits for (ACA) Health Insurance?

Smart Roth Conversion Strategies for Long-Term Savings

Roth conversion strategies can be incredibly powerful, but they’re not right for everyone. In my practice, it’s about a 50-50 split on whether conversions make sense.

The Sweet Spot for Conversions

The best time for Roth conversion strategies is typically in early retirement, after you’ve stopped working but before required minimum distributions begin at age 73 or 75 (depending on your birth year). And even better, before Social Security begins. This gives you a window of potentially 5-10 years+ to fill up lower tax brackets through conversions. I call this the Roth Conversion Window.

Required Minimum Distributions: Plan Ahead

Once required minimum distributions kick in, it becomes much harder to manage your tax brackets. You might find yourself pushed into the 24% or 32% bracket immediately, with little room for strategic conversions.

This is why many of my clients in their late 60s to mid-70s say, “I wish I had started these conversions earlier in retirement.” The key is planning well before you hit that RMD age.

Current vs. Future Tax Brackets

If you’re currently in the 22% or 24% bracket but expect to drop to the 10% or 12% bracket in early retirement, that’s a strong argument for pre-tax contributions now. You can then do Roth conversions during the Roth Conversion Window when your tax bracket drops.

Conversely, if you expect to stay in similar tax brackets throughout retirement (maybe you have a pension or significant investment income), you might consider a smoother Roth Conversion schedule, if that makes sense for your long-term plan.

Your Long-term Plan is the Key

In my humble opinion, Roth Conversions have almost become a little TOO mainstream. When this happens, you might be led to believe that they’re right for you, when in fact they are NOT. The key is asking yourself, who am I planning for beyond me?

If it’s just you, you probably don’t care as much about who pays how much in taxes when you die. If you’re goal is to leave a significant legacy to your adult children who are financially successful in their own right, you might care more about the tax impact of that legacy.

And what about spouses? If your spouse is likely to outlive you by 10-15 years, how would switching to single filing status impact their tax situation? Are you charitably inclined?

So yes, reducing your lifetime tax bill is important. However, who else are you planning for? That will be at the center of the Roth Conversion decision.

Qualified Charitable Distributions (QCDs)

If you’re over 70½, you can donate up to $108,000 directly from your IRA to qualified charities in 2025 (increasing to $115k in 2026). This distribution isn’t included in your taxable income and reduces your required minimum distributions dollar for dollar.

Here’s a practical example: Let’s say your Required Minimum Distribution (RMD) is $50,000 and you typically donate $10,000 to charity. Instead of taking the full RMD and donating cash, do a $10,000 QCD. Now your taxable RMD is only $40,000, potentially saving you $2,000-$3,000 in taxes.

Donor Advised Funds: Bunching Strategy

If your charitable donations don’t usually get you over the standard deduction threshold, consider “bunching” multiple years of donations into a donor-advised fund (DAF). You can contribute multiple years’ worth of donations in one year, potentially unlocking itemized deductions, then distribute the money to charities over time. There is no set deadline for when the money needs to come out of the DAF.

The money in the donor-advised fund grows tax-free, and you can even name a successor to continue the charitable giving after you’re gone.

Donating Appreciated Securities

Instead of donating cash, consider donating appreciated stocks or other securities. You can deduct the full fair market value (up to 30% of your adjusted gross income) while avoiding capital gains taxes on the appreciation.

Advanced Strategies: IRMAA and ACA Considerations

Managing Medicare Surcharges

Your 2024 tax return will determine your Medicare Part B and Part D premiums for 2026. These Income-Related Monthly Adjustment Amounts (IRMAA) can add hundreds of dollars monthly to your Medicare costs.

Review the IRMAA brackets for your filing status and see where your income falls. Sometimes a small Roth conversion can push you into a higher IRMAA bracket, or a charitable deduction can keep you in a lower bracket, saving significant money on Medicare premiums. Of course, when we are closing out 2025, you are thinking about IRMAA for 2027. We currently do not have the brackets set for 2027. However, using some conservative inflation assumptions could be a decent benchmarking tool. I would still provide yourself a buffer if you are cutting it close to the next IRMAA tier.

Asset Location: What Goes Where

For real estate, it’s about LOCATION, LOCATION, LOCATION! For your investment portfolio, Asset Location is about owning the right investments in the right accounts. In taxable accounts, hold tax-efficient investments like index funds or individual stocks you plan to hold long-term. In tax-deferred accounts (401ks, traditional IRAs), hold tax-inefficient investments like REITs, bonds, or actively managed funds that generate significant distributions. Be careful with sitting on TOO MUCH cash in a high-yield savings or money market account. Taxable interest could be your worst enemy.

Proper Asset Location can help reduce your current taxable income while maximizing the tax-deferred growth in your retirement accounts.

Annual Gifting and Estate Planning

Don’t forget about the annual gift tax exclusion: $19,000 per recipient for 2025. This is per donor, so married couples can give $36,000 to each recipient without filing any gift tax returns.

This strategy removes assets (and their future growth) from your estate while providing immediate benefits to your beneficiaries. Will your beneficiaries find more utility in their ultimate inheritance today? Or when they are 65?

Health Savings Accounts: The Triple Tax Advantage

If you have access to an HSA, the contribution limits are $4,300 for self-only coverage and $8,550 for family coverage in 2025, with an additional $1,000 catch-up if you’re over 55.

HSAs offer a triple tax advantage: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. And even after age 65, you can withdraw for any purpose (paying ordinary income tax, like a traditional IRA). However, the best bang for your buck is to reimburse yourself tax-free for medical-related expenses.

Taking Action: Your Next Steps

Effective end-of-year tax planning requires looking at your complete financial picture. Project your 2025 tax bracket and compare it to what you expect in 2026 and beyond. Consider your retirement timeline, expected income sources, and long-term goals.

Remember, tax planning is personal. What works for your neighbor might not work for you. The strategies that make sense depend on your income, tax brackets, retirement timeline, and overall financial goals.

As we head into 2025, take advantage of the opportunities available now.

Max out those contribution limits before December 31st
Consider strategic Roth conversions if you’re in a low-income year
Don’t forget about charitable strategies if you’re charitably inclined.

The key to successful tax planning strategies is taking action before the year ends. These strategies can help set the stage to drastically reduce your lifetime tax bill, putting thousands of dollars back in your pocket during retirement.

At Imagine Financial Security, we help individuals over 50 with at least $1 million in savings navigate complex retirement decisions. If you are looking to

Maximize your retirement spending
Minimize your lifetime tax bill
Worry less about money

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

2025 tax planning end of year tax planning tax bracket management tax planning tax strategies