Trump Accounts for children: Long Island parents weigh strategies as savings program kicks off July 4

Daniel Brecht, of Manorville, wants his sons, Nathan and Logan, to go to college, but with the cost of living on Long Island, including childcare and home repairs, there’s often little left for long-term savings. 

On July 4, Daniel and his wife Erin's eight-month-old son Logan will get a $1,000 boost from the federal government with the debut of Trump Accounts, a new tax-deferred savings option for children.

The new program will kickstart the Manorville couple’s college savings for Logan — but he’ll have the option to use the money for certain other major expenses, such as buying his first house. 

“I’m really happy to see any kind of government program to support growing families,” Daniel Brecht, 36, said. “There’s more and more roadblocks to the American dream now than there ever were, and to see a step in the other direction is refreshing.”

Logan is one of tens of thousands of the tiniest Long Islanders set to receive $1,000 on Independence Day — if their parents opened an account.

Children who are U.S. citizens are eligible for the seed money, but any American child under 18 with a Social Security number can open an account. The Brechts opened up an account for 2-year-old Nathan as well. 

Local financial experts told Newsday the $1,000 deposits could introduce investing to families who might not otherwise participate in the stock market. But some Long Island parents who spoke with Newsday said they preferred other investment options, including the popular 529 college savings plan. 

Those who haven't yet registered can do so by filling out IRS Form 4547, which many tax filers completed with their tax return to sign up their children.

All families with children eligible for $1,000 should open an account, but whether to invest additional money into the account will depend on a family’s resources and savings goals, said Mark Badami, a certified financial planner at the Center for Wealth Preservation in Hauppauge. He plans to open an account for his 15-year-old daughter to use as a teaching tool.

“Any time you can start a kid and show them the discipline of saving, it’s a good thing,” he said.

Some prefer other options

Eli and Nicole Crozier, of Plainview, said they opened a Trump Account for their nine-month-old daughter Ariella, but once they receive the $1,000, they plan to prioritize other types of accounts, including a taxable brokerage account and a 529 plan.

They like the freedom of a brokerage account — a standard option for buying stocks, bonds and other investments — because it gives them greater freedom to withdraw the money without penalties. 

“I like having access to my money,” Nicole Crozier said.

A child can withdraw funds from a Trump Account when they turn 18, and they can avoid a 10% early withdrawal penalty by using the money on certain costs, such as higher education, a first-time home purchase or the birth of a child. 

But Eli Crozier, 36, said he wishes the Trump administration had released more information about which specific investment options would be available through the account. 

The money will be invested in a “diversified index fund of U.S. stocks and must minimize fees and expenses,” according to a report from the Congressional Research Service. Fees on the investments cannot exceed 0.1% of the balance annually.

But the specific choices had not yet been released as of Tuesday. The Treasury Department did not respond to a request for comment. 

Adviser: Consider goals behind savings

Parents should consider the purpose behind their savings, said David Frisch, a certified financial planner and CEO of Frisch Financial in Melville. If they are saving the money for college, a 529 plan could be the superior option, he said.

Those plans allow children using the money for qualified educational expenses, including tuition, student housing and books, to avoid taxes when they withdraw both the initial contribution amount and the earnings on those investments. For Trump Accounts, the gains will be taxed on withdrawal.

Trump Accounts offer a way to save for a child’s retirement that isn’t typically available to parents because other forms of independent retirement accounts require the account holder to earn income, Frisch said.

“In a nutshell, education savings is best in a 529,” he said. “ [For] an extra kicker in terms of a child's retirement savings, the Trump Account could be better.”

About 6 million accounts had been opened as of early June, according to the U.S. Treasury Department, with 1.4 million accounts belonging to children eligible for $1,000.

Brian Cleary, a CPA and lecturer at SUNY Old Westbury’s School of Business, agreed that 529 plans offer tax advantages for saving for college. He said he hopes Trump Accounts expand to offer more conservative investment choices for families who don’t want to invest exclusively in stock indexes, especially as their children approach college age.

“Fixed income options would be a good thing for these type of accounts,” he said, referring to investments that provide a predictable income stream, such as government bonds. 

Amanda and Raimundo Ortiz, of Hauppauge, have children who are too old to qualify for the $1,000. They don’t plan to change their strategy of investing monthly in 529 plans for their 4-year-old son and 2-year-old daughter.

“Right now, I don’t think I would open it,” Amanda Ortiz said of the Trump Account.

“It’s really simple. I have it set up for auto deposit and I check it every couple of months to see how much they’ve accrued,” she said.

Several dozen large national employers have announced plans to match the $1,000 government contribution for U.S. employees, including several who employ workers on Long Island, such as Citi, Chipotle and JPMorgan Chase.

“These investment accounts can help parents plan for the financial success of their children starting at birth, which is especially helpful in our high-cost region when we are tackling our challenges of affordability and retaining young people,” Stacey Sikes, acting president and CEO of the Long Island Association business group, said in an email. 

The accounts will provide a major savings boost particularly for lower-earning families who might not otherwise set aside money, said Jeffrey Reynolds, CEO of the Garden City-based nonprofit Family and Children’s Association.

But they come as the One Big Beautiful Bill Act that established the program also cut billions in spending to Medicaid and food assistance. Those cuts have made it harder for Long Islanders to afford basic needs, Reynolds said.

“It's hard to look 18 years downstream, and say ‘Thanks for the thousand bucks’ when you're worried about being able to pay for your groceries tomorrow and pay for gas to get to work and find someone to watch your kids,” he said.

Mike and Melissa Sutter, both 31, of Holbrook, are expecting their first child in August. They plan to do more research before deciding whether to invest money in the new accounts or a 529 plan, but they’re excited their child will start with a boost for college savings.

“Free money can’t be a bad thing,” Mike Sutter said. “I didn’t vote for him, but I can’t see a bad side of it.”

Melissa Sutter said saving for college is a priority for new parents in her generation, many of whom are still paying off their own student loans.

“It’s foremost in our minds: How are we going to set our kid up for success?”