New Year, New Account: How the 2026 Kids’ IRA Could Jump‑Start Your Child’s Retirement Savings

Beginning in 2026, a new type of tax-advantaged account for children, informally called “Trump accounts”, will become available. These are a special version of traditional IRAs designed to give kids an early head start on long-term retirement investing, with seed money from the federal government and, in some cases, additional funding from private donors.

Important: Rules are new and still evolving. Final forms, portals, and implementation details may change before these accounts launch. This overview is for general information only and is not personal tax or investment advice.

What is a Trump Account?

• A Trump account is essentially a traditional IRA for a child under age 18 who has a Social Security number.

• The accounts were created under the federal “One Big Beautiful Bill” and will take effect for tax years beginning in 2026.

• Although they follow many of the same tax rules as traditional IRAs, there are essential differences in who can contribute, how the accounts are funded, and how distributions work.

Who is Eligible and How Do You Opt In?

• Each eligible child must be opted in by a parent or guardian; accounts are not automatically created.

• The U.S. Treasury will set up the basic account framework for each eligible child, but parents must actively open/activate the account.

• To opt in, parents will either:

  • File new Form 4547, or

  • Enroll through a federal online portal once it is available.

• As of now, only a draft Form 4547 has been released, and the online portal is not expected to be available until mid‑2026.

Government and Private “Seed” Contributions

Trump accounts are unusual because they can receive funding from multiple sources, including the federal government and specific qualifying organizations.

• $1,000 federal contribution:

  • The federal government will contribute $1,000 to each Trump account opened for children born after 2024 and before 2029.

  • Parents must opt in (via Form 4547 or the portal) to receive this contribution.

• Additional $250 for lower‑income ZIP codes:

  • Michael and Susan Dell have pledged $6.25 billion to fund additional contributions for 25 million children ages 0-10 who live in ZIP codes with a median income below $150,000.

  • Eligible children in those areas will receive an additional $250 in their Trump accounts.

• These government and qualifying organizational contributions:

  • Are not taxable to the child.

  • Don’t create a cost basis in the account (they are treated more like pre‑tax contributions inside a traditional IRA for tax purposes).

How Much Can Be Contributed Each Year?

In addition to the federal and qualifying “general” contributions, families and employers can add their own money:

• Up to $5,000 per year can be contributed to a child’s Trump account until the child turns 18.

  • This annual limit applies to all contributions combined (parents, relatives, employers, etc.).

  • The $5,000 limit will be indexed for inflation each year after 2027.

• Of that $5,000 annual limit, up to $2,500 may be contributed tax‑free by an employer of either the parent or the child (if the child has a job).

• Contributions can be made by:

  • Parents or guardians.

  • Grandparents or other relatives.

  • Other individuals who wish to help fund the account.

• Key tax point:

  • No one gets an income tax deduction for contributing to a Trump account.

  • Qualified general contributions by governments or 501(c)(3)s, employer contributions, and the federal $1,000 contribution do not create a cost basis in the account.

• Timing restriction: Contributions cannot begin before July 4, 2026.

Investment Rules and Distribution Basics

These accounts are intended to be long‑term, stock‑based retirement-savings vehicles for children.

Investment options (before age 18)

• Until the child turns 18, Trump account funds may be invested only in:

  • Certain stock mutual funds, or

  • Exchange‑traded funds (ETFs) that track an index of primarily U.S. companies (for example, an S&P 500 index fund).

• The goal is to keep investment choices simple, diversified, and aligned with long‑term growth.

Withdrawals and taxes

• Before age 18:

  • Distributions are generally not allowed while the beneficiary is under 18, with limited exceptions to be clarified in regulations.

• Starting at age 18:

  • Once the beneficiary reaches 18, distributions are taxed similarly to a traditional IRA:

    • Withdrawals that represent cost basis (after‑tax contributions) are generally not taxable.

    • Withdrawals of earnings (growth, income, and pre‑tax contributions) are taxable as ordinary income in the year withdrawn.

  • Before age 59½, taxable portions of distributions may also be subject to a 10% early distribution penalty, unless an exception applies (e.g., certain education expenses, first‑time home purchase, or other qualifying events under IRA rules).

Rollovers

• A Trump account may be rolled over, in or after the year the beneficiary turns 18, to:

  • A traditional IRA for the same beneficiary, or

  • Certain other qualifying retirement accounts (subject to future guidance).

• This allows the account to transition into the standard retirement system once the child is an adult.

Planning Considerations for Families

For many families, especially those who do not currently max out other tax‑advantaged plans, Trump accounts may offer:

• A federally funded start for a child’s retirement savings.

• A structured way for parents, grandparents, and employers to add to long‑term savings.

• Investment in low‑cost, diversified stock index funds with decades to grow.

At the same time, because:

• Contributions are not deductible,

• Investment choices are restricted before age 18, and

• Rules around basis, taxation, and penalties mirror traditional IRA rules,

it will be essential to coordinate any Trump account funding with your broader retirement and education planning, as well as with Roth IRAs, 529 plans, and regular taxable accounts.

Kids’ IRA or UTMA/UGMA Account?

Some leading financial planners have noted that Trump accounts may not always be the best way to save for children.

One key critique is that while these accounts offer tax deferral, they do not provide tax‑free growth as a Roth IRA does. Instead, contributions are after‑tax, and much of the growth is eventually taxed as ordinary income when withdrawn in adulthood, similar to a non‑deductible traditional IRA.

By contrast, a simple taxable custodial account (UGMA/UTMA) can often take advantage of the kiddie tax and favorable long‑term capital gains rates, allowing families to realize gains periodically at low or even 0% tax rates and to step up basis over time. This can leave the child with more after‑tax wealth than a Trump account, even if the account values look similar on paper.​

Advisors also note that flexibility favors traditional custodial accounts.

UGMA/UTMA assets can be used for a wide range of goals once the child reaches majority: education, starting a business, a first home, or other needs, without early‑withdrawal penalties.

Trump accounts, on the other hand, are subject to retirement‑style rules: access is constrained, withdrawals before age 59½ can trigger penalties, and distributions are generally taxed as ordinary income.

Taken together, the ordinary‑income taxation, lack of a true tax‑free “Roth‑like” benefit, and tighter withdrawal rules are why some experts still prefer straightforward taxable custodial accounts as the primary savings vehicle for many families, using Trump accounts (if at all) as a supplemental tool rather than the core strategy.​

Get in touch with us if you’d like help evaluating whether a Trump account makes sense for your family and how it fits with your existing financial planning. The next step is to review your situation and your current saving priorities.

Sam H. Fawaz CFP®, CPA, PFS is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other retirement, college, tax, or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We begin with a thorough assessment of your unique personal situation. There is no rush and no cookie-cutter approach. Each client’s financial plan and investment objectives are unique.

Understanding Invesco's Aggressive QQQ Proxy Push

Several clients have written to me inquiring about the barrage of calls, emails, and messages from Invesco regarding the ETF QQQ's push to gather proxy votes. Here’s an excerpt of one client's question and my response (greatly expanded for this article):

“…not the most consequential message you’ll receive this year, but my curiosity has been piqued ... by the campaign from Invesco QQQ to cast a proxy vote. I’ve never seen anything like it - the mailings, the calls, and so on - for a process that, in my experience, has always been ultra-routine and pretty meaningless for someone like me. Can you explain, and do you have any advice?”

Here’s how I responded

Regarding the campaign, you’re not alone. Many clients have noticed the unusually intense campaign from Invesco regarding the proxy vote for Invesco QQQ, and you’re right that it stands out from what’s usually a routine process for most fund shareholders.

Early on, my business partner suggested that I write and send an email to clients about this. Not realizing the intensity of Invesco’s push, I decided we didn’t need to, which turned out to be a mistake. In all my years in the business, I’ve never seen or heard of any company launching such an intense and aggressive proxy gathering campaign.

Here’s what’s really going on

Invesco is proposing to convert the ETF QQQ from its current structure (a unit investment trust, which dates back to the earliest ETFs) into a modern, open-ended exchange-traded fund. The primary rationale is to enhance flexibility, oversight, and reduce costs. Specifically, if shareholders approve, the QQQ expense ratio would decrease by 10% (from 0.20% to 0.18%), resulting in tens of millions of dollars in yearly savings across the fund. Importantly, this change won’t impact QQQ’s strategy, holdings, or tax characteristics, nor will it change the fund’s manager or its index-tracking approach.

The reason you’ve gotten multiple mailings and calls? Invesco requires a high level of shareholder participation: by law, converting QQQ’s trust structure requires more than half of all shares to be actively voted “yes.” Unlike typical votes where non-responses are ignored, in this case, non-votes count as “no” votes—which is why the fund is spending so much to encourage participation and obtain a quorum. With so many retail investors holding QQQ, this is a true logistical challenge.

Details of the push

• Three separate proposals must all pass: shareholders are voting on three linked items: conversion from a unit investment trust to an open-ended ETF, associated changes to the management/advisory structure, and the creation of a board of directors. If any proposal fails, none of the changes will be implemented.​

• Non-votes count as “No” votes: Unlike routine proxy votes, shareholders who do not respond are counted against the proposals, making high participation essential.​

• Shareholder benefits include:

  • Lower expense ratio (from 0.20% to 0.18%, estimated savings ~$70 million/year).​

  • Enhanced governance via a new board overseeing the fund for the first time; greater reporting and transparency, including summary prospectuses and semi-annual reports.​

• No change to investment objective, index, or tax treatment: The fund will continue to track the Nasdaq-100® Index. The conversion is a tax-free event for shareholders.​

• Huge outreach effort: Invesco is spending an estimated $40 million on proxy solicitation to ensure quorum, highlighting the unusual scale and importance of this campaign.​

• Record date: August 15, 2025. Only shareholders of record as of this date are eligible to vote.​

• If approved, conversion is likely to happen by year-end or early 2026.

Potential downsides of shareholder approval

• Increased Operational Flexibility Means More Managerial Discretion: The move to an open-ended fund structure allows Invesco and its new board greater latitude in making changes, such as fee adjustments or introducing derivatives, that previously required more restrictive oversight under the unit investment trust (UIT) format. This future flexibility depends on the intentions and discipline of the board and managers, and could shift if there’s turnover in leadership.​

• Invesco Begins Collecting Direct Management Fees: The new format allows Invesco to collect a “unitary management fee” that the trust structure previously didn’t permit. This creates an incentive to grow profits and, potentially, alter expenses down the line, despite the initial fee reduction.​

• Board Compensation and Governance Costs: A nine-member board will be introduced, which adds an additional cost layer (director compensation and overhead) that could offset some savings or shift incentives compared to a strictly trustee-based approach.​

• Liquidity Risk in Market Downturns: Open-ended funds may be forced to sell portfolio assets at unfavorable prices if a large number of investors redeem shares during periods of stress, potentially impacting performance. The UIT structure allows shares to trade among investors without requiring the sale of underlying assets, a mechanism that some investors value for stability during volatile times.​

• Shareholder Risk in Securities Lending: Invesco may expand its securities lending activities under the new structure, and any resulting risks or losses would be borne directly by shareholders, not by Invesco.​

• No Guarantee Future Fees Will Remain Lower: While initial projections indicate a 10% reduction in the expense ratio, future changes to fee schedules are possible under the new open-ended structure, subject to board approval.​

While many see these risks as manageable, they should be evaluated alongside the promised benefits. It’s important for shareholders to understand both sides before casting a vote.

What major institutional holders think

Major institutions that hold QQQ have generally leaned in support of the conversion vote, viewing the restructuring as beneficial for both operational efficiency and cost reduction. However, the fund has an unusually large retail investor base, making institutional votes influential but insufficient to guarantee passage, which is why Invesco has mounted such an aggressive campaign.​

• Institutional Sentiment: Proxy advisory firms and ETF strategists have publicly supported the move, highlighting reduced expense ratios, improved governance via a new board, and enhanced transparency as positives for shareholders. Major institutional holders—including major brokerage platforms, asset managers, and pension funds—are widely expected to vote in favor due to these clear-cut advantages, as their own portfolios will directly benefit from fee savings.​

• Voting Weight: Institutions typically vote their shares, but approximately 40–50% of QQQ ownership is held by retail investors, and a majority of the outstanding shares must vote “yes” for the conversion to occur.​

• No Institutional Opposition Spotted: As of now, there is no reported campaign of institutional opposition to the change; the proposal is seen industry-wide as a modernization step that aligns QQQ with other large ETFs.

What I think

This change appears to be designed to benefit shareholders by offering lower costs and greater transparency. Despite the potential downsides, it is unlikely to introduce major surprises or large additional risks.

If you agree, I’d suggest voting in favor; however, you won’t be at any disadvantage if you simply ignore the campaign—the fund will continue regardless. Invesco’s push is simply a matter of meeting the voting threshold they need.

Timing of the vote postponed

The original QQQ conversion proxy vote was scheduled for October 24, 2025. After failing to reach a quorum at the original meeting, the vote was postponed to December 5, 2025.

It sounds like the phone calls, emails, snail mail, and text messages will continue for a few more weeks. Or as they say, “the beatings will continue until morale improves.” Maybe casting your vote will stop all the messages. In any case, it’s worth a try.

Sam H. Fawaz CFP®, CPA, PFS is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other retirement, college, tax, or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We begin with a thorough assessment of your unique personal situation. There is no rush and no cookie-cutter approach. Each client’s financial plan and investment objectives are unique.

The High Ground: Why AI Will Never Replace Human Financial Planners

Introductory Note: I was inspired to write this based on a recent rant by one of the fathers of the financial planning profession and author of “Inside Information”, Bob Veres. I’ve used his rant (with his express written permission) to expand on this topic.

Every few months, the same headline resurfaces—“Artificial intelligence (AI) won’t replace human financial planners.” It’s meant to reassure, but perhaps we should also ask: why does this declaration keep needing to be made?

These forecasts of inevitable obsolescence have circulated through our profession for decades. We heard them when the first planning programs rolled out in the early 1980s. We heard them again in the 2010s, when “robo‑advisors” promised efficient algorithms would do the same work for a fraction of the cost. Today, with artificial intelligence reshaping industries from law to logistics, we’re told—yet again—that technology will soon do it all… but “not yet.”

My position is simpler: not ever.

Am I being naive or perhaps ignorant of where AI is headed? Perhaps.

Many don’t know this, but the roots of the “geek” in my financial planning moniker, “themoneygeek,” stem from my strong interest and decades-long professional background and expertise working in technology as a software product manager, technology consultant, and educator.

I got my start in the financial planning profession by first consulting with other financial planners on their technology architecture needs to get that proverbial foot in the door. So, as a self-declared technogeek since the 1980s, I have some credibility when making this statement.

What Technology Really Does Best

Let’s be clear—technology is not the enemy of good advice. It’s an amplifier. AI‑driven tools can already integrate real‑time market data, automate rebalancing, flag tax‑loss harvesting opportunities, model cash flow across multiple scenarios, and surface insights about spending or risk that would take hours to identify manually.​

A fee‑only fiduciary who embraces these tools can deliver faster answers, cleaner reporting, and deeper analytics. In that sense, technology actually gives human advisors more leverage to serve their clients—just as earlier innovations like portfolio management and financial planning software once did.​

But algorithms can’t build trust, navigate life events, or calm a shaken client during a market shock. A spreadsheet doesn’t hear the fear in someone’s voice. A chatbot doesn’t see a spouse’s expression at the thought of retiring early or funding a child’s education.

The True Frontier of Advice

The maturation of our profession has always followed an upward path—from product sales, to planning, to personalized professional advice. The next step is coaching: helping clients clarify what they truly want from this one precious life they’ve been given.

That process involves conversations about purpose, family, trade‑offs, and meaning—topics that no predictive model can quantify. Many clients, given the tools, still won’t set priorities or pursue their deeper goals without a trusted nudge from a human advisor. They’ll plan for others before they plan for themselves. And that’s where the real value of our work lies: helping people live their money, not just manage it.​

Where the “High Ground” Lies

The safest territory from automation is not in number‑crunching but in connection—the human partnership that turns goals into action.

Technology can see patterns. Only people can see you.

Artificial intelligence will make planners faster, smarter, and more efficient—but never replace the relationship that gives planning its meaning.

So rather than defending our values against technology, let’s stand firmly on higher ground:

Empathy. Context. Coaching. Accountability.

Those are the edges no algorithm can reach.

Sam H. Fawaz CFP®, CPA, PFS is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other retirement, college, tax, or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We begin with a thorough assessment of your unique personal situation. There is no rush and no cookie-cutter approach. Each client’s financial plan and investment objectives are unique.

2026 Open Enrollment Guide: Essential Tips for Employee Benefits Selection

As we approach the annual open enrollment period for most employers (typically October through November 2025), now is the perfect time to review your employee benefits and make informed decisions that will impact your financial well-being throughout 2026.

Why Open Enrollment Matters More Than Ever

Open enrollment is your once-a-year opportunity to make changes to your employer-sponsored benefits. Outside of qualifying life events (marriage, divorce, birth of a child, etc.), this is likely your only chance to:

• Switch health insurance plans or carriers

• Adjust life and disability insurance coverage amounts

• Modify flexible spending account (FSA) elections

• Review and update beneficiary information

• Evaluate supplemental benefits like vision, dental, or critical illness coverage

Key Areas to Review During Open Enrollment

Health Insurance

Health insurance, especially catastrophic health insurance, is not optional for anyone, as healthcare and hospitalization costs continue to skyrocket.

• Compare your plan options carefully: Don’t automatically re-enroll in your current plan. Premiums, deductibles, and covered providers may have changed.

• Consider your 2026 healthcare needs: Are you planning any major medical procedures? Do you have ongoing prescriptions? Select a plan that matches your anticipated usage.

• Network providers: Verify that your preferred doctors and hospitals are still in-network for your chosen plan.

• Supplemental Insurance: Analyze the real total cost of dental and eye care insurance by comparing total out-of-pocket costs with and without insurance. With meager benefits, limited payments, and high co-pays or co-insurance, the premiums may not be worth the coverage provided, and you therefore may want to forego coverage.

• Total cost analysis: Look beyond monthly premiums to include deductibles, co-pays, and out-of-pocket maximums. Are you a good candidate for a high-deductible health plan (i.e., you’re generally in good health and have minimal consumption of healthcare), which makes you eligible for a health savings account (HSA)?

Life and Disability Insurance

• Life insurance: Review your current coverage amount. Has your income increased? Do you have new dependents? Consider whether your current coverage adequately protects your family’s financial needs. Consider whether you really need accidental death and disability insurance and whether it’s worth the extra cost.

• Disability insurance: Evaluate both short-term and long-term disability options. Your income is likely your most valuable asset—protect it accordingly. For most people, maximizing available disability insurance coverage is a great idea.

• Supplemental coverage: Group rates through your employer are often more affordable than individual policies purchased elsewhere.

Flexible Spending Accounts (FSAs)

• Healthcare FSA: Estimate your out-of-pocket medical expenses for 2026, including prescriptions, dental work, and vision care.

• Dependent Care FSA: If you have qualifying childcare or eldercare expenses, this pre-tax benefit can provide significant savings.

• Remember the “use it or lose it” rule: Most FSAs have limited carryover provisions (some plans require you to use all amounts by December 31; others give you a few extra months), so plan and understand your elections carefully.

Smart Decision-Making Tips

1. Gather last year’s data: Review your 2024-2025 healthcare spending, insurance claims, and FSA usage to inform your 2026 decisions.

2. Calculate total annual costs: Don’t focus solely on monthly premiums. Add up premiums, deductibles, and expected out-of-pocket expenses for a comprehensive view.

3. Consider your family situation: Changes in marital status, number of dependents, or family health conditions should influence your benefit selections. Compare benefits and costs if both spouses work, and make choices that fit your family’s needs.

4. Think ahead: Are you planning a family addition, major surgery, or a career change in 2026? Factor these into your benefit choices.

5. Update beneficiaries: Use this time to ensure your beneficiary information is current for all accounts (e.g., 401(k), 403(b), 457, 401a plans) and insurance policies.

6. Ask questions: Don’t hesitate to attend employer benefit sessions or contact HR for clarification on plan details.

We’re Here to Help

Navigating open enrollment can feel overwhelming, but you don’t have to do it alone. We are available to consult with you on your benefit elections and help you make informed decisions that align with your financial goals and family needs.

To ensure we can provide timely guidance and help you meet enrollment deadlines, please contact us before your employer’s enrollment period closes. Many companies have strict deadlines in late October or November, and missing these dates could mean waiting until next year to make changes.

Take Action Now

• Mark your calendar: Note your employer’s specific open enrollment dates

• Gather your information: Collect recent medical bills, current benefit summaries, and family health information.

• Don’t procrastinate: The best benefit choices require careful consideration—start planning now.

Your employee benefits are a significant part of your total compensation package. Making thoughtful, informed decisions during open enrollment can save you money and provide better protection for you and your family throughout 2026.

Sam H. Fawaz is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other tax or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We begin with a thorough assessment of your unique personal situation. There is no rush and no cookie-cutter approach. Each client’s financial plan and investment objectives are unique.

U.S. Government Shutdown 2025: What It Means and How Long It Could Last

The federal government officially shut down many of its operations at 12:01 a.m. on October 1, 2025. (1) This is the 15th government shutdown since 1980. Most were short, lasting one to three days. The longest lasted 34 full days, from December 2018 to January 2019. (2)

It’s impossible to predict how long the current shutdown might last, but it may be helpful to know more about why it happened and what you can expect if it continues.

Zero out of 12 appropriations bills

The federal fiscal year begins on October 1, and under normal procedures, twelve appropriations bills for various government sectors are expected to be passed by that date to fund activities ranging from federal employee salaries to national park operations and food safety inspections.

These appropriations are considered discretionary spending, meaning that Congress has the flexibility to set the amounts. Obviously, it would be helpful for federal agencies to know their operating budgets in advance of the fiscal year, but all 12 appropriations bills have not been passed before October 1 (or any time during the year) since FY 1997. (3)

In 2018–19, five of the twelve appropriations bills had passed prior to the shutdown, which helped limit the damage. (4) This year, no appropriations bills have been passed. However, some agencies — primarily in the Department of Defense and Department of Homeland Security — received new funding from the One Big Beautiful Bill Act passed this summer, which may allow certain programs and functions to continue. (5)

Continuing resolutions and omnibus spending bills

To buy time for further negotiations, Congress typically passes a continuing resolution, which extends federal spending to a specific date, generally at or based on the level of the previous year. These bills are essentially placeholders that keep the government open until full-year spending legislation is enacted.

Even with the extensions provided by continuing resolutions, Congress seldom passes individual appropriations bills. Instead, they are often combined into massive omnibus spending bills that may include other provisions unrelated to funding.

The current situation

The U.S. Constitution gives the House of Representatives sole power to initiate revenue bills, so the House typically passes funding legislation and sends it to the Senate. Whereas the House can pass legislation with a simple majority, the Senate generally requires 60 votes to pass legislation due to the filibuster rule. This, in turn, typically requires cooperation from both political parties.

The House approved a continuing resolution that would extend funding for seven weeks at current levels of spending. Senate Republicans, with one exception, voted for the bill late on the night of September 30, joined by three Democrats for a total of 55 votes, five votes short of the 60 votes needed to pass. Earlier in the evening, a Democrat-sponsored continuing resolution also failed to pass. (6)

Although a larger group of Senate Democrats provided support for a similar continuing resolution in March, they have refused to support this resolution unless it includes an extension of Affordable Care Act (ACA) health insurance subsidies that are scheduled to expire on December 31, 2025.

Allowing the ACA subsidies to lapse could significantly raise health insurance premiums for many Americans, and Republican leadership has expressed a willingness to consider extending them, but not as part of the continuing resolution. Democrats also seek to reverse spending cuts to Medicaid. (7)

Effects of the shutdown

According to the law, the U.S. Treasury cannot spend money that has not been approved by Congress. Therefore, agencies that rely on discretionary spending cannot pay their employees or maintain essential services.

Each agency has its own shutdown plan. Certain “essential services” — primarily related to public safety — will continue and be funded retroactively after funding has been authorized. Here are the potential effects on some key services. (8–12)

· Mail will continue to be delivered because the U.S. Postal Service is self-funded.

· Social Security, Medicare, and Medicaid will continue to make payments because the funds for these programs do not require annual appropriations. However, other services, such as benefit verifications and application processing, may cease.

· Interest on Treasury securities will continue to be paid.

· Federal workers will not be paid. Workers considered “essential” will be required to work without pay, while others would typically be furloughed. However, the Trump administration has issued instructions that agencies should use the shutdown as an opportunity to reduce their workforces, an action that has not occurred during previous shutdowns. Lost wages for essential and furloughed employees will be reimbursed after funding is approved.

· Unlike federal employees, private contractors who often work side-by-side with federal employees are not guaranteed to be paid.

· Air travel could be affected. In 2019, high absenteeism among Transportation Security Administration (TSA) workers, who were required to work without pay, resulted in long lines, delays, and gate closures at some airports.

· Environmental and food inspections could stop.

· “Accessible areas” of national parks, such as roads, trails, and open-air memorials, will remain open, as will locations and services supported directly by visitor fees. Other areas may be closed, and visitor services may be unavailable.

· The Internal Revenue Service has special funding that will allow it to maintain operations for the first five business days of the shutdown. It’s unclear what would happen after that, but if a large number of workers are furloughed, the IRS would be unable to perform verifications for income and Social Security numbers, which could delay mortgage and other loan applications. Tax refunds could also be delayed.

· Key economic reports, like the monthly jobs report, may be delayed, making it more difficult for the Federal Reserve to gauge economic activity when making decisions.

· The National Flood Insurance Program will stop issuing policies or renewals.

· Federal student loan disbursements and grants to local school districts should continue, along with processing the Free Application for Federal Student Aid (FAFSA). However, an extended shutdown could cause delays in processing and support activities, and schools located on federal land, such as Indian reservations or military bases, could temporarily lose funding.

· The Supplemental Nutrition Assistance Program (SNAP or food stamps) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) will continue for now, but it is unclear how long they can be sustained.

While any shutdown causes hardship for federal workers and the citizens they serve, a brief shutdown typically has a minimal effect on the broader U.S. economy, because lost payments are generally made up after spending is authorized. However, an extended shutdown can be costly.

The Congressional Budget Office estimated that the 2018–19 shutdown reduced gross domestic product (GDP) by $11 billion, including $3 billion that was never recovered. Even so, this was a tiny fraction of GDP. (13)

Previous shutdowns have generally not significantly impacted global markets, except for some moderate short-term volatility. However, a prolonged shutdown could have a greater temporary impact. (14)

If the shutdown continues, be sure to check the status of federal agencies and services that may directly affect you.

Shutdown effects on markets and the debt ceiling

The current shutdown has sparked little more than a yawn among investors. On the first two days of the shutdown, the S&P 500 index closed higher, suggesting that many people are barely aware of what is happening or the potential ramifications.

Although the current debate is not directly related to the debt ceiling, we will likely confront that issue again in January.

The debt ceiling was temporarily suspended in August 2023 through December 31, 2024. However, once the suspension expired, the debt ceiling was reinstated to approximately $36.1 trillion to account for obligations incurred during the suspension period.

Congress raised the statutory debt ceiling by $5 trillion in July 2025, increasing the limit from $36.1 trillion to $41.1 trillion. Interestingly, the national debt is projected to surpass $39.4 trillion by January 1, 2026.

While it appears that markets are largely ignoring this current shutdown, if it drags on, it could become a bigger problem than most expect. The longer this issue continues, the closer we come to facing the same situation with the debt ceiling at the start of 2026.

Note: Projections are based on current conditions, are subject to change, and may not materialize as expected.

Sam H. Fawaz CFP®, CPA, PFS is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other retirement, college, tax, or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We begin with a thorough assessment of your unique personal situation. There is no rush and no cookie-cutter approach. Each client’s financial plan and investment objectives are unique.

Footnotes: 1) The Hill, October 1, 2025; 2, 5, 13) CBS News, September 29, 2025; 3) The New York Times, September 29, 2025; 4, 10) Committee for a Responsible Federal Budget, September 16, 2025; 6) The New York Times, September 30, 2025; 7) Associated Press, September 29, 2025, and October 1, 2025; 8) The Wall Street Journal, October 1, 2025; 9, 14) CNBC, October 1, 2025; 11) The New York Times, October 1, 2025; 12) ABC News, October 1, 2025