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Treasury expands “Trump Accounts” defaults with low-cost index ETFs
The guidance sets up Trump Accounts with funding routes including a $1,000 tax-free federal seed grant and up to $5,000 yearly from families, using ETFs with 0.02% to 0.03% expense ratios.
The U.S. Treasury Department announced new guidance for its “Trump Accounts,” a program aimed at giving children tax-advantaged long-term savings, and it outlined a set of low-cost index funds to be used in the accounts. Yahoo Finance reports the guidance is designed to help keep costs low and rely on broad diversification to support long-term growth.
According to the release, a child can have an account opened on their behalf at any age from birth until they turn 18, with funding coming from several sources. These include a one-time, tax-free $1,000 federal seed grant, up to $5,000 annually from parents, family, and friends, employer contributions capped at $2,500 tax-free per year, and qualified private donors.
The Treasury previously said the State Street SPDR Portfolio S&P 500 ETF (SPYM) would serve as the go-to default. It also added four additional low-cost index ETFs, including BlackRock’s iShares Core S&P 500 ETF (IVV), Vanguard’s Total Stock Market ETF (VTI), the SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM), and the iShares Core U.S. Aggregate Stock Market ETF (ITOT).
The ETFs cited in the guidance carry low expense ratios of 0.02% to 0.03% annually. The materials state this structure is intended to allow returns to compound across potentially hundreds to thousands of holdings over time.
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