There has been a lot of conversation around the new “Trump Accounts” for children—and for good reason. Giving children a head start on investing could potentially create meaningful wealth over a lifetime. But from a tax-planning perspective, I think the more interesting conversation may be what happens after age 18.
How Does a Trump Account Work?
Created under Internal Revenue Code Section 530A, a Trump Account is technically a type of traditional IRA. The tax code specifically states that a Trump Account is an individual retirement account that “is not designated as a Roth IRA.”
For 2026 and 2027, generally up to $5,000 per year may be contributed during the child’s growth period, with certain contributions excluded from that limit. The $5,000 limit is scheduled to be indexed for inflation after 2027. Importantly, a child does not need earned income to receive these contributions.
Children born from 2025 through 2028 who meet the federal eligibility requirements may also qualify for a one-time $1,000 government contribution, which does not count toward the regular $5,000 limit. During the growth period, investments are generally restricted to qualifying low-cost funds that track broad U.S. stock indexes, and withdrawals are generally prohibited.
Why I Still Love the Roth IRA
When a child has legitimate earned income, from babysitting, modeling, landscaping, working in a family business or another qualifying job, I generally think a Roth IRA deserves serious consideration. Why? A Roth IRA potentially allows decades of tax-free growth and qualified tax-free withdrawals.
A Trump Account is different. Contributions from individuals generally create after-tax basis, but the account itself operates under traditional IRA tax rules after the growth period. That means families should think beyond simply accumulating money and consider the account’s eventual tax treatment.
This is where Roth conversions become interesting.
The Age-18 Roth Conversion Opportunity
After the Trump Account growth period ends, traditional IRA rules generally apply. At that point, the young adult could potentially begin converting portions of the account to a Roth IRA. Under IRC §408A, traditional IRA assets may generally be converted to a Roth IRA. The taxable portion of a conversion is included in income for that year.
For a young adult with relatively little taxable income, that could create an interesting planning window. Rather than converting the entire account at once, families might evaluate partial Roth conversions over several years, potentially filling lower federal income-tax brackets. The appropriate amount would depend on the child’s income, deductions, IRA basis, other accounts, and tax law at the time.
Consider This Hypothetical Example
Assume a family contributes $5,000 annually from birth through age 17 and the account earns an average 8% annual hypothetical return.
At age 18, the account could be worth approximately $187,000.
Now assume the young adult strategically converts the account to Roth over four years, with the taxable portions assumed to remain within the 12% federal tax bracket, and makes no additional contributions.
If those dollars ultimately remain invested and continue earning an assumed 8% annually, the account could grow to approximately: $4.6 MILLION by age 59½.
If Roth requirements are satisfied, qualified distributions could potentially be federal income-tax-free.
The lesson isn’t simply “open a Trump Account.” The bigger opportunity may be thinking several steps ahead.
Trump Account → evaluate Roth conversions after age 18 → potentially decades of tax-free compounding.
Tax laws, tax brackets and individual circumstances can change significantly over time. Families should work with their tax and financial professionals before implementing Roth conversions or other tax strategies.
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