With the launch of Trump Accounts under the Working Families Tax Cuts Act — and a major philanthropic gift from Michael and Susan Dell — many parents are comparing these new child savings accounts with a Custodial Roth IRA (Roth IRA for children).
Both accounts support early investing for kids, but they differ significantly in purpose, eligibility, and tax treatment. Here’s a concise breakdown.
What is a Trump Account?
A Trump Account is a tax-deferred investment account for children under 18. Funds are invested in low-fee U.S. stock index funds, and the child gains access at age 18.
Key features
- Available to any child under 18 with a Social Security number
- Converts to a traditional IRA at age 18
- No withdrawals before 18
- Invested only in broad U.S. equity index funds (≤0.10% fees)
Who receives the $1,000 government seed?
Only U.S. citizen newborns born 2025–2028 qualify for the one-time $1,000 Treasury deposit.
What about older children?
Kids born before 2025 can still open accounts but do not receive the $1,000. Millions may qualify for a $250 philanthropic contribution from the Dell family if they are 10 or under and live in eligible ZIP codes.
Contribution limits
- Up to $5,000/year from family and employers
- Employer contributions up to $2,500 may be pre-tax
- Charitable and government contributions don't count toward the $5,000 limit
What is a Custodial Roth IRA?
A Custodial Roth IRA is a tax-free retirement account for a minor funded by earned income. A parent or guardian manages the account until adulthood, and it remains a Roth IRA for life.
Key features
- Requires IRS-documented earned income
- Investment growth and qualified withdrawals are tax-free
- Contributions can be withdrawn anytime
- Can be used for education or a first home
- Remains a Roth IRA after age 18
Contribution limits
- The child’s earned income up to $7,000 in 2025 (rising to $7,500 in 2026)
A side-by-side comparison
| Feature | Trump Account | Custodial Roth IRA |
|---|---|---|
| Primary purpose | Childhood savings → traditional IRA | Long-term, tax-free retirement wealth |
| Eligibility | Any child under 18 | Must have earned income |
| Seed funding | $1,000 (2025–2028 newborns); $250 (select kids ≤10) | None |
| Tax treatment | Tax-deferred | Tax-free |
| Access | No withdrawals before 18 | Contributions anytime |
| Age transition | Converts to a traditional IRA | Stays a Roth IRA for life |
| Contribution limit | $5,000/year | $7,000–$7,500/year |
What parents should consider
Trump Accounts offer simple, early savings — especially for babies eligible for the $1,000 seed. However, they grow tax-deferred, and funds remain locked until age 18.
Custodial Roth IRAs require earned income but offer unmatched long-term advantages: tax-free growth for life, penalty-free access to contributions, and decades of compounding.
Many families may benefit from using both accounts.
Where Halfmore fits in
A Custodial Roth IRA is powerful — but only if a child has IRS-compliant earned income. Halfmore helps families create legitimate payroll for household tasks, ensuring each payment is documented and qualifies for Roth IRA contributions.
This makes long-term, tax-free compounding accessible to families of all backgrounds.
Which is right for your family?
- Choose a Trump Account for government or philanthropic seed funding and simple early investing.
- Choose a Custodial Roth IRA to maximize long-term, tax-free wealth and financial education.
Most families benefit from combining both tools.
Any information provided does not constitute tax, legal, or accounting advice. These materials are intended for general informational purposes and should be relied upon as specific advice. Any communication through email constitutes subject matter should still be considered of a general discussion nature. U.S. Treasury regulations require us to provide the information contained in paragraph to you. Unless expressed stated otherwise, any U.S. federal tax advice contained in this publication was not intended or written to be used by any taxpayer for the purpose of avoiding any penalties that may be imposed by the U.S. Internal Revenue Service.
