This Week’s Blog Is Written By Scott D. Heins, CFP®, IAG Chief Investment Officer
April 8, 2026

New IRA Option

Coming this summer, taxpayers will have yet another type of retirement savings account from which to choose.

You are likely familiar with traditional IRAs and Roth IRAs. Both of those IRA flavors require a taxpayer to have earned income to make IRA contributions in a given tax year.

This new type of IRA focuses on individuals that do NOT have earned income and may not even know what retirement is. Who in the world would those people be, you ask? Your minor children or grandchildren!

The new IRA type is called a “Trump account” and was created in the tax legislation that Congress passed last summer. The US Treasury is planning to permit taxpayers to fund these accounts beginning on July 4, 2026.

Unlike other IRAs, this new IRA flavor has two different stages of life – growth and post-growth.

The growth stage is from a child’s birth through December 31 of the year before they will turn age 18. During the growth stage:

• The child is the account owner and can only have one account that is opened for them by their guardian, parent, adult sibling, or grandparent
• Opening an account with the US Treasury requires filing IRS Form 4547 or using this link.
• Children born after 12/31/24 and before 1/1/29 may apply for a $1,000 bonus contribution from the federal government
• Contributions made by people (parents, grandparents, the account owner, etc.) are not tax deductible and create cost basis in the account that is not taxable upon future withdrawals.
• Account contributions from employers under a Section 128 plan are not taxable income to the employee up to a total of $2,500 per year (not per child), and are taxable upon withdrawal. The $2,500 limit will be adjusted for inflation after 2027.
• Account contributions from charities or other government entities also do not create cost basis in the account and are taxable upon withdrawal.
• The annual contribution limit is $5,000 per year in 2026 and 2027 (adjusted for inflation after that). The $1,000 federal bonus contribution does not count toward this limit. This contribution limit is completely separate from traditional or Roth IRA contribution limits if the account owner has earned income and wishes to make other IRA contributions.
• All contributions are designated for the tax year in which they are received (no extension to April 15 as with other IRA contributions)
• Investment options are very limited and required to invest primarily in US companies.
• Distributions are not permitted unless an account owner dies. Whoever inherits the account must liquidate it immediately and pay any applicable taxes.
• An account may be rolled over to another custodian, but an account owner may only ever have one account.

The post-growth stage begins on January 1 of the year an account owner will turn 18. During the post-growth stage:

• Account distributions are treated like traditional IRA accounts, except that any cost basis in the account is NOT aggregated with other retirement accounts.
• An account owner may elect to keep the account as a “Trump account,” roll it over to a traditional IRA account, or convert it to a Roth IRA.

This new IRA type will create new planning opportunities for parents who wish to give their children a headstart on retirement savings.

Advantages include teachable moments about long-term retirement savings, tax-deferred compounding growth, a $1,000 bonus for newborns, and a significant jumpstart on building a retirement nest egg. Disadvantages include additional complexity, limited investment choices, and the account owner having complete control over the account once they turn 18.

Depending on your family’s goals, you may think this new type of IRA is the opportunity of a lifetime or a complete waste of time. We are happy to help you determine where on this spectrum your family falls based on your specific advantages and disadvantages.

While the IRS has issued these initial regulations to govern these new IRA accounts, they have not been finalized and could change in the future. As always, be sure to consult with your tax professional before making any tax-related decisions.

Quote of the week: Malcom Gladwell: “If incompetence is the disease of the novice, overconfidence is the disease of the expert.”

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principle.

ART: 1087369
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