Suze Orman Says This Is Who Should and Shouldn't Open a Trump Account
Parents can now open Trump Accounts for children under 18, and some kids could receive an automatic $1,000 government contribution.
But while personal finance expert Suze Orman said that's an opportunity worth considering, she warns that many families should focus on their own finances before putting additional money into one.
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Here's who she believes should open a Trump Account and who may be better off waiting.
Who Should Open a Trump Account, According to Orman
For many parents, especially those with young children, opening a Trump Account can be a smart financial move. Orman particularly recommends it if you are a parent or grandparent of a child born in 2025, 2026, 2027, or 2028.
"A child born in these years, who is a U.S. citizen and who has a Trump Account opened on their behalf, will get an automatic $1,000 deposited in the account from the federal government," she wrote in a recent blog post. "That’s free money no one should pass up."
You should also consider opening an account if your employer plans to contribute to it. Employers can contribute up to $2,500 tax-free each year to the Trump Accounts of employees or their dependents.
"Again, you should never turn down free money," Orman said.
Employer contributions can make the account especially attractive because workers can benefit without contributing their own funds.
When Orman Says You Should Avoid Contributing
Orman's main concern is less about the account itself and more about people who would be putting their own finances at risk to contribute to one.
She said that parents and guardians should not contribute to a Trump Account if any of the following is true:
Your emergency fund isn’t large enough to cover at least eight months of living expenses.
You have credit card debt.
You have student loan debt.
You have car loans.
Your own retirement savings are not on track.
"In other words: Until your financial life is in great shape, I don’t want you to contribute to a Trump Account for a child," Orman said. "You owe your child the security of knowing they will not need to step in and support you 20, 30, 40 years from now."
Why Orman Says a Roth IRA May Be Better for Some Teens
Orman recommended utilizing a Roth IRA over a Trump Account if you would be opening the account for a teenager who is already earning income.
"The tax treatment of a Roth IRA — no tax owed on contributions withdrawn, and no tax on earnings withdrawn in retirement — is better than the Trump Account," Orman said. "Contributions to a Trump Account are made with after-tax money, so they will not be taxed again when withdrawn, but 100% of earnings withdrawn will be taxed as ordinary income."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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