By Leada Gore
al.com
(TNS)
Tens of millions of American children may soon be auto enrolled in Trump Accounts, according to new guidance from the Treasury Department.
The change could create accounts for more than 60 million additional children under age 18. About 73 million children are eligible for the program and roughly 7 million have signed up since the accounts launched July 4, CNBC reported.
Currently, parents have to opt-in to the account. The change would do away with that process in favor of automatically established accounts, something proponents said would open the program up to more low-income families and unlock private donations.
Currently, only 5% of low- and moderate-income families—those earning up to $80,000 annually—have opened a Trump Account.
The auto enrollment change is expected to take place Oct. 1.
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What are Trump Accounts?
The tax-advantaged accounts are available to any child in the U.S. under the age of 18 with a Social Security number. Babies born between Jan. 1, 2025 and Dec. 31, 2028 are eligible for $1,000 in federal seed money, regardless of family income.
Parents and others can contribute up to $5,000 per year into the accounts that will be invested in a portfolio of low-cost index funds. If fully funded and left untouched, the White House projects it could grow to as much as $1.9 million by age 28.
What parents need to know
The $1,000 in seed money won’t be automatic even under the auto-enroll procedure. Parents or guardians will still have to request the money and claim their child’s account before they can make a deposit.
Accounts are set up by filing Form 4547 with the IRS with taxes or at any time during the year. The Internal Revenue Service estimates it takes five to 10 minutes to establish an account.
Funds used for qualified expenses—such as education, buying a home or starting a business—can be accessed without penalty at age 18, though withdrawals are taxed at ordinary income rates and may be subject to additional restrictions.
Photo credit: Daniel Torok/The White House/Flickr
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