Trump Accounts, touted by the White House as a game-changer to get children on the path to building savings, can hurt their access to disability benefits as adults if parents aren't vigilant, financial and legal experts say.
Any child under 18-years-old with a Social Security number has an account in their name that can be claimed in the Trump Accounts app. Individuals, companies, state and local governments, and qualified charities can contribute annually up to a combined $5,000 to a Trump Account, but $1,000 of Treasury seed money is only available to U.S. children born between 2025 and 2028.
Money will be invested in low-cost index funds, although new rules now allow donors to give individual stocks. No withdrawals are allowed until the year
the child turns age 18, when accounts basically become traditional IRAs with the same rules. Parents can also choose in the year the child turns 18 to convert the account to a Roth IRA, which could result in some taxes.
Those options work for most children turning 18, but not for a disabled child. Retirement accounts count towards an individual's $2,000 ($3,000 for a married couple) asset cap to qualify for supplemental security income (SSI), and $1,000 invested in the stock market from birth to 18 years should easily top that threshold, financial and legal advisers say.
"I applaud any initiative that helps families build financial security for their children," said Thomas Giordano, Jr., founding partner of the national workers' compensation and Social Security disability law firm Pond Lehocky Giordano. "But we need to be careful that a program designed to help children today doesn’t unintentionally hurt children with disabilities tomorrow."
Should disabled children skip Trump Accounts?
After 18 years, $1,000 invested in the S&P 500 would grow to approximately $5,560, for example, assuming the last century's average S&P 500 index return of about 10% per year. So, if your child is eligible for the $1,000 seed money from the government, most financial advisers would say take the free money.
However, parents and guardians must mark their calendars to remind them to roll the entire Trump Account into an ABLE account in the calendar year the child turns 17 years old.
ABLE accounts are tax-advantaged savings accounts for individuals who are totally and permanently disabled. Withdrawals for qualified disability expenses are tax free and the account up to $100,000 isn't counted towards assets and income to qualify for SSI or other federal benefits programs like Medicaid. Medicaid asset thresholds are the same as for SSI in most states.
Money from the Trump Account rollover doesn't count towards the standard annual ABLE contribution limit, which is $20,000 for 2026. Contributions up to the full limit can still be made the year of the rollover.
Rollover timing is crucial, advisers said. "Before the child turns 18, you must do a one-time, tax-free rollover into an ABLE account, but it must be done before the child's 18th birthday," said John Rafferty, partner and investment adviser representative at Solomon Financial. "It's your only chance to get it out from being included in SSI and Medicaid."
At 18 years, Trump Accouts automatically turn into an IRA that can no longer be rolled into an ABLE account and will count towards the asset threshold, advisers warned. The only option then would be to spend down the Trump Account money and possibly, incur early withdrawal penalties and taxes in accordance with IRA rules.
How many Americans receive disability benefits?
About 7.3 million Americans received SSI in August, according to the Social Security Administration's (SSA) monthly snapshot.
When including those on Social Security Disability Insurance (SSDI), or disability insurance, the numbers double. About 7 million Americans have worked long enough to collect SSDI when they became disabled. Another million are spouses or children of the disabled worker who receive SSDI.
Experts said there are even more disabled Americans than official numbers show. Many Americans don't even know they're entitled to SSDI and aren't counted, according to a study of 1,033 adults by Atticus, which advises people on SSDI. Every U.S. worker pays on average $588 per year in federal taxes to fund their SSDI coverage, but only 50% of eligible workers claim it, the survey said. Only 15% are even aware of the federal insurance program they would qualify for if they were no longer able to work.
And if Americans do know, the benefits are hard to get. About 70% of applications are rejected at least once, according to recent SSA data.
Rafferty said it took him and his wife about two years, mounds of paperwork, interviews, a rejection and two appearances before a judge to get SSI for their disabled daughter when she turned 18-years-old.
"Our daughter at least had her mom and I to support her that whole time," Rafferty said. "At the time, my wife wasn't working. I was glad because it was a full time job for her. If I had to do it again, I would hire a lawyer."
Sam Byker, Atticus chief executive said, "it's not supposed to be adversarial, but it is," he said. "There are thousands of pages of law that govern this." An attorney, whether through Atticus or elsewhere, can "reduce time to get approved by about 6 months, help them file faster, win at earlier stage, or appeal faster," he said.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: Could Trump Accounts hurt benefits for children with disabilities?
