Trump Accounts vs. Kiddie Roth IRAs
- Brian Page
- 3 days ago
- 7 min read
What Parents Should Know Before Choosing a Long-Term Savings Strategy for Their Kids
Table of Contents
Donald Trump and the Republicans in Congress passed the self-proclaimed “One Big Beautiful Bill Act,” signed into law on July 4th of 2025. Included in the bill are Trump Accounts for children.
This post compares Trump Accounts and Kiddie Roth IRAs side by side, focusing on what really matters to busy dual-career families. Simplicity. Long-term growth. And avoiding unintended consequences.
To be clear, the post compares these two account types because they are most similar to other federal options among the nine existing tax-advantaged savings vehicles, each with different rules, limitations, and regulations. According to the right-leaning think tank, the Tax Foundation,
“Trump Accounts further complicate savings for taxpayers who would have to keep track of yet another account. Additionally, the Treasury Department and IRS, which are already bogged down with administering the existing plethora of savings accounts, would be forced to administer yet another account.”
It appears the promise of DOGE to reduce the cost of government redundancies is ignored if new spending bears the Trump name.
It is impossible to discuss Trump Accounts honestly without addressing the broader fiscal context in which they were created. And it's through this context that I am nauseated by what we are doing to our children.
The Big Beautiful Bill that established these accounts is projected to add more federal debt than any bill in recent U.S. history. The total cost of the legislation will add $4.1 trillion more to the national debt over the next decade (including interest payments).
To be clear, we are borrowing from our kids to “give” some kids $1,000. And how much debt are we passing down to our kids?
Currently, our U.S. debt is the equivalent of $106,000 per person. I personally refuse to be swindled by celebrating a grand borrowed from our already crippling debt.
And it gets worse.
According to the 2025 Trustees Report, Social Security’s combined trust funds are projected to be depleted in the mid-2030s if Congress does nothing. At that point, the system would still collect payroll taxes, but only enough to pay roughly three-quarters of promised benefits.
And frankly, middle-class folks can barely afford groceries right now; they can't spare investing in "Trump accounts." So the program may be open to everyone, but not everyone can afford to participate fully. I would prefer the dollars are spent to make life more affordable for folks who reduce our burdensome budget deficits.
That does not mean families should ignore the account. It does mean we should be clear-eyed about what it is and what it is not.
For this post, we will slow down and look at how Kiddie Roth IRAs and Trump accounts actually work. You will notice that essential differences emerge. Differences in contribution rules. Differences in investment flexibility. Differences in tax treatment. Differences that matter when you zoom out and think in decades, not years.
What Are Trump Accounts?
Trump Accounts are a new type of tax-advantaged account. Each eligible child receives a one-time federal contribution of $1,000. Additional contributions from parents, relatives, or others are allowed, generally capped at about $5,000 per year from all sources. Contributions beyond the government seed amount cannot begin until July 4, 2026.
Trump Accounts: Who is Eligible
Any U.S. child under 18 with a Social Security number, established by a parent/guardian; children born 2025-2028 get a taxpayer paid $1,000 government deposit, while other eligible children can have accounts opened but miss the initial government funds, with accounts growing tax-deferred until age 18 for specific uses like education or business.
What Is a Kiddie Roth IRA?
A Kiddie Roth IRA is a Roth IRA opened for a child who has earned income. The account is legally owned by the child, with a parent acting as custodian until the child reaches the age of majority.
The key requirement is earned income. Baby modeling, babysitting, lifeguarding, working at a coffee shop, refereeing youth sports, tutoring, or legitimate self-employment all qualify, as long as the income is real and documented. Frankly, any parent can find a creative way to show earned income for contributions.
Contribution limits are straightforward. A child can contribute up to the lesser of their earned income or the annual Roth IRA limit, which is $7,000 in 2024 and 2025. Parents can provide the money, but the child must have earned at least that amount.
Unlike Trump Accounts, Kiddie Roth IRAs have been around for decades. The rules are well established. The investment options are broad. The tax treatment is widely understood.
Trump Accounts vs. Kiddie Roth IRAs: The Details
Contribution Limits and Accessibility
This is where the two accounts begin to diverge in meaningful ways.
Trump Accounts provide a guaranteed, one time, $1,000 starting balance for children born 2025-2028 get a $1,000 government deposit. Annual contributions from all sources are capped, typically around $5,000.
Kiddie Roth IRAs do not come with a government seed. But they allow contributions up to $7,000 per year, as long as the child earns that much.
Investment Options and Flexibility
Trump Accounts have narrow investment rules. The funds must be invested in U.S.-based equity index funds or similar qualifying investments. The goal is simplicity and standardization, but the tradeoff is flexibility.
Trump Accounts do not allow you to invest outside the United States.
Kiddie Roth IRAs offer broad investment choices depending on the brokerage. Families can invest in U.S. and international stocks, bonds, diversified ETFs, target-date funds, or globally diversified portfolios.
This difference matters when you zoom out and think about risk and return over multiple decades.
According to Vanguard’s long-term capital market assumptions over the next 10 years, U.S. equities are expected to return between 3.5 percent and 5.5 percent. Global equities outside the United States are expected to return between 4.9 percent and 6.9 percent. Developed markets outside the United States are expected to return between 5.2 percent and 7.2 percent.
Vanguard’s projections of established global markets, excluding the U.S. market, are even wider over 30 years, based on current U.S. fiscal policy.
No forecast is guaranteed. But diversification has always been one of the most reliable tools investors have to manage uncertainty. Limiting a child’s account to U.S. equities only increases concentration risk over a 40 to 60-year horizon.
Tax Treatment Where Things Get Subtle
Parent or family contributions to Trump accounts are not tax-deductible. Growth is tax-deferred. Withdrawals are taxed in retirement. For those who can comprehend more complex tax opportunities or can afford a financial planner, backdoor Roth IRAs can be set up.
But simple is better, and Kiddie Roth IRAs are simpler. And better. Here’s why.
Kiddie Roth IRA contributions are made with after-tax dollars. Growth and qualified withdrawals in retirement are entirely tax-free. Because the majority of children do not earn more than the standard deduction (it’s $16,100 for a single filer in 2026), most will never pay a penny in taxes throughout the full contribution, growth, and withdrawal process of a Kiddie Roth IRA.
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Withdrawal Rules and Control
Trump Accounts are designed to encourage long term retirement saving. Funds are generally locked until the child reaches adulthood and then subject to standard retirement account rules.
This structure reduces temptation but also limits flexibility.
Kiddie Roth IRAs offer more optionality. Contributions can be withdrawn at any time without taxes or penalties. Earnings generally must stay invested until retirement age, with limited exceptions.
That flexibility can matter for education, a first home, or emergencies, especially for families juggling multiple goals at once.
For Most, Kiddie Roth IRAs Are Better Than Trump Accounts
At first glance, Trump Accounts sound appealing. A $1,000 government contribution for children born 2025-2028 feels like free money. But when you slow down and compare how these accounts actually work over decades, Kiddie Roth IRAs consistently come out ahead for families who care about simplicity, flexibility, and long-term outcomes.
Kiddie Roth IRAs are simpler and more established.
Kiddie Roth IRAs have existed for decades. The rules are well understood, the tax treatment is clear, and nearly every major brokerage supports them. Trump Accounts add yet another savings vehicle to an already overcrowded system, increasing complexity for families and administrative burden for the IRS. Even the conservative Tax Foundation has warned that Trump Accounts complicate savings without delivering meaningful new benefits.
Kiddie Roth IRAs allow higher contributions.
Trump Accounts cap annual contributions from all sources at roughly $5,000, and families must wait until mid-2026 to add anything beyond the government seed. Kiddie Roth IRAs allow contributions up to the annual Roth limit, $7,000 in 2024 and 2025, as long as the child has earned income. Over 10 to 20 years, that difference compounds dramatically.
Kiddie Roth IRAs offer far better investment flexibility.
Trump Accounts restrict investments to U.S.-based equity funds. That may sound patriotic, but it increases concentration risk over a 40- to 60-year horizon. Kiddie Roth IRAs allow globally diversified portfolios including U.S. stocks, international equities, bonds, and low-cost ETFs. Vanguard’s long-term projections show higher expected returns outside the U.S. over the next decade, reinforcing why diversification matters for children investing across generations.
The tax advantage of Kiddie Roth IRAs is hard to beat.
Trump Accounts grow tax-deferred and are taxed when withdrawn in adulthood. Kiddie Roth IRAs grow completely tax-free. Because most children earn less than the standard deduction, currently projected to be $16,100 for single filers in 2026, many kids will never pay taxes going in, growing, or coming out. That is one of the cleanest tax wins available in the entire system.
Kiddie Roth IRAs provide more flexibility when life happens.
Trump Accounts are largely locked down until adulthood, limiting options if family needs change. Kiddie Roth IRAs allow contributions to be withdrawn at any time without taxes or penalties. That optionality matters for education, a first home, or unexpected expenses, especially for families balancing multiple priorities.
The bottom line.
Trump Accounts are not useless, but they are not transformative. Kiddie Roth IRAs remain the more powerful, flexible, and tax-efficient way for families to invest for their children’s future. When you think in decades instead of headlines, the choice becomes clear.