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| Early withdrawal (before 59½) | Taxed as income + possible 10% penalty | Contributions can be withdrawn anytime, tax-free |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.
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This is educational content, not tax or financial advice. Sources: IRS Notice 2025-68, Bankrate.