Trump Account vs Roth IRA for Kids: Which Is Better?
Last verified: 2026-02-12Bottom Line
- Trump Account: No earned income needed, $1,000 free deposit, but taxed on withdrawal (traditional IRA at 18)
- Roth IRA: Requires earned income, no free deposit, but tax-free withdrawals in retirement
- For babies/toddlers: Trump Account wins (no earned income requirement)
- For working teens: Both — Trump Account + Roth IRA is the power combo
People often confuse Trump Accounts with Roth IRAs for kids, but they work very differently. The biggest difference: Trump Accounts don't require earned income and convert to a traditional IRA (not Roth) at 18.
Side-by-Side Comparison
| Feature | Trump Account | Custodial Roth IRA |
|---|---|---|
| Earned income required? | No | Yes — child must have earned income |
| Federal deposit | $1,000 (2025–2028 births) | None |
| Annual contribution limit | $5,000/year | $7,000/year or earned income (whichever is less) |
| Tax on contributions | After-tax | After-tax |
| Tax on growth | Tax-deferred | Tax-free |
| Tax on retirement withdrawals | Ordinary income tax | Tax-free (after 59½) |
| Investment options | S&P 500 / U.S. equity index only | Almost anything (stocks, bonds, ETFs, mutual funds) |
| Employer contributions | Up to $2,500/yr tax-free | Not available |
| Early withdrawal (before 59½) | Taxed as income + possible 10% penalty | Contributions can be withdrawn anytime, tax-free |
| At age 18 | Converts to traditional IRA | Ownership transfers to child (stays Roth) |
The Biggest Difference: Earned Income
A custodial Roth IRA requires your child to have earned income — from a job, babysitting, lawn mowing, etc. A 6-month-old baby has no earned income, so a Roth IRA is off the table.
A Trump Account has no earned income requirement. You can open one for a newborn on day one and start contributing immediately (after July 4, 2026).
✅ The power move for working teens
When your child starts earning money (part-time job, summer work), open a Roth IRA alongside the Trump Account. The Trump Account converts to a traditional IRA at 18, and the Roth provides tax-free retirement income. Having both types by age 18 is a massive head start.
Tax Treatment: Traditional vs Roth
This is where many people get confused. A Trump Account is not a Roth account. At 18, it converts to a traditional IRA:
- Trump Account (Traditional IRA at 18): Pay taxes when you withdraw. If your child withdraws $50,000 at age 25, they pay ordinary income tax on the full amount.
- Roth IRA: Pay no taxes when you withdraw in retirement. Contributions can be withdrawn anytime tax-free. Earnings are tax-free after age 59½.
Recommended Strategy by Age
- Birth to teen years: Trump Account only (no earned income = can't use Roth)
- Teen with first job: Trump Account + Roth IRA (fund both)
- Age 18+: Consider converting Trump Account traditional IRA to Roth IRA (pay taxes now, grow tax-free)
Frequently Asked Questions
Is a Trump Account like a Roth IRA?
No. A Trump Account converts to a traditional IRA at 18, not a Roth. Withdrawals are taxed as ordinary income. A Roth IRA offers tax-free withdrawals.
Can I convert the Trump Account to a Roth IRA later?
At 18, the Trump Account becomes a traditional IRA. Your child could then do a Roth conversion (pay taxes on the balance now, then grow tax-free). This is a common strategy if they're in a low tax bracket at 18.
Which should I open first?
For babies and young children: Trump Account first (claim the $1,000 deposit, no earned income needed). For teens with jobs: both.
Trump Account vs 529 Plan
Education savings comparison
Withdrawal Simulator
See tax impact at different ages
Deep Dives on This Topic
Roth Conversion Strategy at 18
Converting the traditional IRA to a Roth IRA while in a low tax bracket at 18 could save thousands in future taxes. Here is the math.
6 min readHow Are Trump Account Gains Taxed?
Growth is tax-deferred. Withdrawals after 18 are taxed as ordinary income. Before 59.5, a 10% early withdrawal penalty also applies.
5 min readBest Investment Accounts for Kids (2026)
Comparing Trump Accounts, 529s, custodial accounts, Roth IRAs, and Coverdell ESAs. Which ones should you open? Our recommendation.
7 min readTrump Retirement Accounts: What Happens at Age 18?
Trump retirement accounts: at 18, the Trump Account becomes a traditional IRA. Your child can convert to Roth, withdraw, or keep investing.
5 min readThis is educational content, not tax or financial advice. Sources: IRS Notice 2025-68, Bankrate.