My wife and I are expecting our first child this September. Lately, our conversations have started to sound a lot like my client meetings: childcare costs, college savings, a larger emergency fund, and an updated estate plan. Working in wealth management has a way of making you think about those decisions a little earlier than most. 

When clients ask how to save for a child, I start with what the money is ultimately intended to accomplish. If the goal is education, a 529 plan is difficult to beat. Once a child has earned income, contributing to a Roth IRA can be one of the most valuable long-term gifts a family can make. 

Trump Accounts, formally established under Internal Revenue Code Section 530A, give families another savings vehicle to consider. For a broader overview of eligibility, contribution rules, and investment restrictions, see our guide on how Trump Accounts work. 

Qualifying U.S. citizen children born from 2025 through 2028 are eligible for a one-time $1,000 federal contribution after the required election is made. This benefit has received much of the attention surrounding the new accounts.  

At first glance, however, Trump Accounts are not especially compelling, and here’s why. 

Contributions are not tax-deductible, and investment growth is subject to ordinary income tax when eventually distributed. 

Other accounts may provide more favorable tax treatment depending on the family’s objective. A 529 plan offers tax-free withdrawals for qualified education expenses. A Roth IRA offers the potential for tax-free growth and tax-free qualified withdrawals. Even a taxable brokerage account has the advantage of preferential long-term capital gains and qualified dividend tax rates. 

So why would I open a Trump Account for my son? 

The most compelling reason is not the $1,000 federal contribution. It is what the account may eventually become. 

During the account’s growth period, parents and other individuals, employers (including those considering Trump Accounts as an employee benefit option), and even government and charitable organizations may collectively contribute up to $5,000 each year, subject to inflation adjustments after 2027. These contributions may be made even when the child has no earned income. 

That distinction is important. Direct contributions to a traditional or Roth IRA require taxable compensation. As a result, most children cannot begin contributing to an IRA until they have a job. 

A Trump Account allows the family to begin building retirement assets years earlier. 

The more interesting opportunity begins January 1 of the calendar year in which the beneficiary turns 18. At that point, most of the special Trump Account restrictions fall away, and the account becomes subject to the same rules as a traditional IRA—including the rules governing Roth conversions. 

Unlike a direct Roth IRA contribution, a Roth conversion does not require earned income. The taxable portion of the conversion is included in the beneficiary’s income. Once the money is in the Roth IRA, it can compound tax-free for decades, with (qualified) withdrawals also received tax-free. 

A young adult may have a lower-income window during college, graduate school, or the first few years of a career, making this approach even more attractive. 

This fact does not mean the entire account should automatically be converted at age 18. The timing of a conversion requires careful planning. 

One consideration is the kiddie tax, which may cause some or all of the conversion income to be taxed using the parents’ higher tax rates. Whether the kiddie tax applies depends on various factors, including the child’s age, student status, earned income, and financial support. 

Depending on the circumstances, it may be more efficient to complete the conversion over several years or wait until the kiddie tax no longer applies, but before the beneficiary’s income increases substantially. 

Consider Emma and Jack. 

Emma is born in 2026, receives the $1,000 federal contribution, and her family contributes $5,000 each year through age 17, for total family contributions of $90,000. If we assume an 8% average annual return and other assumptions described below, her Trump Account would be worth approximately $206,000 at age 18. 

She then converts the account to a Roth IRA and pays an illustrative 20% combined federal and state tax on the taxable portion. Ideally, the tax would be paid with funds outside the account so the full balance can be converted, and a potential 10% early-withdrawal penalty on funds used to pay the tax can be avoided. If the full account remains invested and she never contributes another dollar or takes a withdrawal, the Roth IRA could grow to roughly $7.6 million by age 65. 

Jack does not have a Trump Account. He begins contributing $7,500 per year to a Roth IRA after graduating from college at age 22 and continues through age 64. Although Jack contributes a total of $322,500, more than three times the amount contributed for Emma, his Roth IRA would grow to approximately $2.67 million by age 65. 

The illustration demonstrates the power of an early start: Emma’s family contributes substantially less, but the additional years of compounding allow her account to grow to nearly three times Jack’s balance. 

This hypothetical illustration is for educational purposes only and does not represent actual investment results. It demonstrates the potential impact of long-term compounding under specific assumptions, including an 8% annual return, beginning-of-year contributions, no investment fees or withdrawals, no changes in tax law, and payment of Roth conversion taxes from funds outside the account. It is not a projection, forecast, or guarantee of future performance or account values. Actual investment returns, taxes, contribution limits, investment expenses, legislative changes, and Roth conversion outcomes will vary and may materially affect results. 

Trump Accounts are not a replacement for a 529 plan, nor will they necessarily be the first account a family should fund. Families should first evaluate their education goals, retirement needs, liquidity, estate plan, and other savings opportunities. 

Because these accounts are new and regulatory guidance continues to develop, families should coordinate contribution and conversion decisions with their wealth advisor and tax professional. 

For families with the capacity to save toward multiple objectives, however, Trump Accounts offer something genuinely different: the ability to begin funding a child’s retirement years before the child has earned income, followed by the opportunity to convert those assets to a Roth IRA during a potentially favorable tax window. 

That is why, based on what we know today, I expect to open one for my son. 

Not just because of the $1,000. 

Because by the time he earns his first full-time paycheck, nearly two decades of retirement savings may already be working for him. 

Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Aldrich Wealth’s website and its associated links offer news, commentary, and generalized research, not personalized investment advice. Nothing on this website should be interpreted to state or imply that past performance is an indication of future performance. All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with a tax professional before implementing any investment strategy.