Trump Accounts are a new type of investment account for children, and some eligible kids may receive a $1,000 contribution from the U.S. government.
But what do Canadian families living in the United States need to know?
In this video, Bryan Haggard, CFP® and CFA, explains:
• Which Canadian children may be eligible
• Who qualifies for the $1,000 contribution
• Whether grandparents can open or fund an account
• How much the account could potentially grow over time
• How Trump Accounts compare with 529 plans
• What may happen if the child later moves to Canada
Trump Accounts may offer children decades of potential compound growth, but they are still structured as traditional IRAs. That means families should understand the contribution rules, withdrawal restrictions, tax treatment, and possible cross-border complications before investing significant amounts.
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Summary
Quick recap
Bryan discussed the new Trump accounts, which are retirement accounts for minors under 18, and explained their features, eligibility, and potential benefits. He highlighted that U.S. citizens with children born between 2025 and 2028 can receive up to $1,000 of free government money for these accounts, but non-citizens are not eligible for this contribution. Bryan outlined the contribution limits, investment options, and tax implications, noting that contributions are not tax-deductible, but the money grows tax-deferred. He also addressed cross-border considerations for Canadians living in the U.S., emphasizing the long-term growth potential of these accounts but pointing out drawbacks such as a lack of immediate tax benefits and limited access to funds before retirement. Bryan compared these accounts to other savings options like 529s and Roth IRAs, suggesting that Trump accounts can be a good secondary savings vehicle but may not be ideal for everyone, especially for education savings. He concluded by encouraging Canadians in the U.S. to consider their specific needs and seek professional advice.
Summary
Trump Accounts for Canadians Discussion
Bryan discussed the new Trump accounts, now live, explaining that they could provide up to $1,000 in free government money to some people. He outlined his plan to cover who qualifies, cross-border considerations for Canadians living in the United States, and whether it makes sense for them to contribute to these accounts. The discussion was introduced as part of Bryan’s role as a Certified Financial Planner and Chartered Financial Analyst, specializing in working with Canadians living in the U.S.
Trump Account for Minor Savings
Bryan explained that new Trump accounts are designed for minors under 18, typically opened by parents or grandparents for retirement savings. He noted that these accounts qualify for government funding of up to $1,000 for children born between January 1, 2025, and December 31, 2028. Bryan mentioned that not everyone would qualify for this funding.
Trump Plans Eligibility Requirements
Bryan explained that both U.S. citizens and permanent residents can open Trump plans, but only U.S. citizens are eligible for the $1,000 government pilot contribution. He clarified that while non-citizen permanent residents can contribute to accounts for their children, those children would not be eligible for the government payment if they are not U.S. citizens. Bryan provided an example of a client who wanted to contribute to their child but would not qualify for the $1,000 contribution due to their green card status.
Trump Accounts Structure and Rules
Bryan explained the structure and rules of Trump accounts, which are designed for children under 18, with parents or guardians managing the account until the child turns 18. He outlined the annual contribution limit of $5,000 (inflation-adjusted) and the requirement for investments in low-expense-ratio mutual funds or ETFs. Bryan also mentioned the tax-deferred growth potential of these accounts over several decades.
US Retirement Accounts for Canadians
Bryan explained that Canadian residents living in the US can contribute up to $5,000 per year to US retirement accounts, provided their child is a US resident. He noted that while Canadian residents may not receive the additional $1,000 government intervention benefit, the accounts provide long-term growth potential for the child’s retirement, regardless of where they eventually live. Bryan clarified that these accounts would function as IRA-style retirement accounts even if the child later moves to Canada.
Children’s Investment Account Benefits
Bryan explained the significant benefits of starting investment accounts for children, noting that even with just the $1,000 government supplement, accounts could grow to $40,000-$100,000 by age 60 without additional contributions. He highlighted that consistent annual contributions of $1,000 until age 18 could result in $500,000-$1,000,000 by age 65, potentially exceeding millions with higher contributions and earlier starts. Bryan mentioned that while these accounts offer substantial long-term benefits, there are considerations to evaluate before opening them.
Trump Account Drawbacks Discussion
Bryan discussed the drawbacks of new Trump accounts, explaining that they offer no tax benefits on contributions, unlike IRA accounts, and withdrawals before age 59.5 would typically incur taxes and penalties. He noted that while these accounts grow tax-deferred, they are better suited for retirement savings rather than college savings or other short-term financial goals. Bryan recommended considering Trump accounts for eligible children to receive the $1,000 government supplement, or for early savings, but not for education purposes.
Trump Accounts for Children’s Savings
Bryan discussed the benefits and considerations of Trump accounts for saving for children and grandchildren, noting that while they offer tax-free growth, they may not be the best option for teenagers earning income, as they would need to pay taxes on withdrawals in the future. Bryan mentioned using 529s for his 12-year-old’s college savings and potentially using Trump accounts as a secondary savings option. Bryan concluded by encouraging listeners to consult with cross-border financial advisors at RetireMitten.com for further guidance.