Core Points - An Individual Retirement Account (IRA) is a tax-advantaged investment account for retirement savings, independent of employer ties, making it suitable for self-employed individuals and those looking to supplement workplace retirement accounts [1][2] Types of IRAs - The main types of IRAs are traditional IRAs and Roth IRAs, each with distinct tax implications and contribution rules [3][4][5] - Other types include Rollover IRAs, SEP IRAs, SIMPLE IRAs, Custodial IRAs, Spousal IRAs, and Inherited IRAs, each serving specific needs and circumstances [6][7] IRA Rules - Contributions to IRAs require taxable compensation, defined as income from work, and eligibility varies based on income levels and participation in workplace retirement plans [9][10] - Roth IRAs have specific income limits for contributions, with thresholds set for 2025 and 2026, affecting eligibility based on modified adjusted gross income (MAGI) [11][12] - Annual contribution limits are set by the IRS, with amounts adjusted for inflation; for 2025, the limit is $7,000, increasing to $7,500 in 2026 [13][14] Withdrawal Rules - Traditional IRAs incur taxes on withdrawals, with a 10% penalty for early distributions before age 59 ½, though exceptions exist [15][16] - Roth IRAs allow tax-free withdrawals of contributions at any time, with earnings accessible tax-free after age 59 ½ and a five-year holding period [16][17] - Required Minimum Distributions (RMDs) for traditional IRAs begin at age 73, increasing to 75 in 2033, while Roth IRAs do not require RMDs during the account holder's lifetime [17] IRA vs 401(k) - IRAs and 401(k)s are both tax-advantaged retirement accounts, but IRAs are opened independently, while 401(k)s are employer-sponsored; individuals can contribute to both [18] Choosing an IRA - Factors to consider when choosing an IRA provider include fees, investment options, advisor access, and user experience [24][25] - Steps to open an IRA include deciding on the type, selecting a provider, opening the account, funding it, and choosing investments [26] Rollover IRAs - Rolling over a 401(k) or 403(b) into an IRA can provide lower fees and more investment options, simplifying account management [27] - Specific rules must be followed to avoid penalties during rollovers, including matching the tax structure of the original account and completing the rollover within 60 days [28][29]

Core Viewpoint - The "Trump Accounts" initiative aims to help lower-income Americans build wealth through investment accounts for children, although the effectiveness will depend on the program's mechanics and implementation [1]. Program Details - The program is set to launch on July 4, 2026, with the U.S. Treasury depositing $1,000 into investment accounts for children born between 2025 and 2028 who have a valid Social Security number. The funds will be invested in low-cost index funds that grow tax-deferred, with income taxes due upon withdrawal [2]. - Contributions to a child's account can be made by parents, guardians, employers, or other entities, limited to $5,000 per year, with employer contributions capped at $2,500 per year [3]. Philanthropic Involvement - Entrepreneur Michael Dell and his wife, Susan, pledged $6.25 billion to deposit $250 into the investment accounts of 25 million American children, specifically targeting those in areas with a median family income of $150,000 or less [4]. Economic Impact - The initiative is expected to boost investment in the U.S. economy and educate families about compound interest as they observe their children's savings grow over time. Additional donors are anticipated to contribute to the program [5]. Tax Implications - The Trump Accounts function as custodial retirement accounts, converting to traditional IRAs when the child turns 18. Withdrawals will be subject to IRA-style treatment, including penalties for early or non-qualified use [6][7]. Comparison with Other Savings Mechanisms - 529 plans are highlighted as another savings option for families, primarily for educational expenses, with varying state tax benefits for contributions, although they do not offer federal income tax deductions [8].