The U.S. Department of the Treasury recently proposed guidance governing eligible investments in Trump Accounts, establishing a framework for the designation of eligible investments for future Trump Account trustees, including rollover trustees.
“For a child investing over decades, even small differences in annual costs may have a meaningful effect on the amount available in adulthood,” Frank Bisignano, Internal Revenue Service CEO, said. “By emphasizing low-cost index investing, the proposed rules seek to maximize the share of investment returns that remains in each child’s account.”
The guidance is intended to provide families with clear, transparent investment choices focused on cost, diversification and long-term financial performance. It also is intended to support the long-term growth of children’s Trump Accounts by limiting eligible investments to choices with low expense ratios and excluding products with excessive fees or unnecessarily complex strategies.
An eligible index must be designed primarily to measure the performance of a broad segment of the U.S. or global equity market using objective financial criteria under the framework.
State Street SPDR Portfolio S&P 500 ETF (exchange-traded fund) is the default investment for all Trump Accounts. A parent or other responsible party can chose four additional low-cost index ETFs for investment. Over time, investment fees and expenses can materially reduce account balances.