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. 

Eight-month-old Logan Brecht is eligible for a $1,000 boost from the federal government with the July Fourth debut of Trump Accounts, a new tax-deferred savings option for children. His parents Daniel and Erin Brecht can now contribute to his account.

The new program will kickstart the Brechts' college savings for Logan — but he can also use the money without penalties for certain other expenses, including buying his first house, once he turns 18.

“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 through the federal savings program. 

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 also opened an account for 2-year-old Nathan. 

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 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.

Families with children eligible for $1,000 should open an account, but whether to invest additional money into the account will depend on their 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 savings options

Eli and Nicole Crozier, of Plainview, said they opened a Trump Account for their 9-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 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 expenses, such as higher education, a first-time home purchase or the birth of a child. 

The government's initial deposits will be invested in an exchange-traded fund managed by Boston-based State Street that tracks the S&P 500 index. It charges a 0.02% fee annually, or 20 cents per $1,000.

The Trump administration chose the fund because it is the lowest cost option tracking the broad U.S. stock index, the Treasury Department said on a call with reporters this week.

Other fund low-cost ETFs tracking U.S. stock indexes would become available in the accounts in the coming months, the department said.

Still, Eli Crozier, 36, said he favors other options because of questions about how the money in Trump Accounts might be taxed in the future.

"It's a great idea, but is it the best investment vehicle for a child right now?" Crozier said. "We would say no."

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 to avoid taxes on both the initial contribution amount and the investment gains when they make withdrawals to pay for qualified educational expenses, including tuition, student housing and books. 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 with Frisch that 529 plans offer better 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.

The 529 plan "is 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 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 [Trump], 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?”