Treasury Sets Index Fund Rules for Trump Baby Accounts
The Treasury Department has clarified how money in so-called 'Trump accounts' must be invested, limiting options to low-cost index funds.
The Treasury Department has issued guidance specifying that funds deposited into the newly dubbed 'Trump accounts' — savings vehicles for children established under recent federal policy — must be placed into low-cost index funds, answering a pressing question for parents and financial planners who have been waiting on the details.
The ruling narrows the investment universe considerably, steering families away from actively managed funds and toward passive, broadly diversified vehicles that track market benchmarks. That structure is designed to keep fees low and returns tied to broader market performance over the long arc of a child's early years, an approach widely endorsed by mainstream financial research.
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For parents eager to put money to work in these accounts, the Treasury's guidance provides the clearest roadmap yet on which specific funds qualify — a critical piece of information that had been missing since the accounts were first announced. Financial advisers are now expected to begin updating their recommendations accordingly.
The move reflects a broader policy preference for passive investing in government-backed savings programs, echoing design principles seen in other federal vehicles such as the Thrift Savings Plan. How robustly the accounts grow will ultimately depend on which index funds make the approved list and how closely their expense ratios are scrutinized by regulators.
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