Trump Accounts vs. 529 Plans vs. Custodial Roth IRAs: Where Should Money for a Child Go?

Start with the goal, not the account

Before comparing tax rules, ask when the child is likely to need the money and what you hope it will pay for. Education, retirement and general early-adult expenses are different jobs. Accounts designed for one job can be awkward for another.

1. What is a Trump Account?

Trump Accounts are a new type of traditional IRA with special rules for children. An account can generally be established for a child with a Social Security number if the election is made before the calendar year in which the child turns 18. Funding began July 4, 2026.

During the growth period, most individual and employer contributions are subject to a combined $5,000 annual limit, with inflation adjustments after 2027. Certain government and qualified general contributions do not count against that limit. Employer contributions can receive separate tax treatment under the new rules.

2. Who can receive the $1,000 Treasury contribution?

The federal pilot program provides a one-time $1,000 contribution for an eligible child who is a U.S. citizen, has a valid Social Security number and was born in 2025, 2026, 2027 or 2028. An authorized person must make the election. The pilot contribution does not count against the general $5,000 annual contribution limit.

3. How can Trump Account money be invested?

During the growth period, the statute requires eligible investments, and Treasury/IRS have issued proposed regulations describing how those rules would operate. Under the proposal, eligible investments generally are mutual funds or ETFs tracking an equity index made up primarily of U.S. companies, without leverage, with annual fees and expenses no greater than 0.10%.

The proposed rules are not the same thing as final regulations. Terra will update this page as implementation guidance changes.

4. Can the child withdraw the money?

Generally, distributions are not permitted during the growth period, subject to limited exceptions such as certain rollovers, excess-contribution corrections and distributions after death. After the growth period, traditional IRA rules generally apply.

That makes this fundamentally different from a general-purpose savings or brokerage account. Money intended for a car at 16 or another near-term expense should not be treated as if it has the same access.

5. How does a 529 differ?

A 529 plan is designed primarily for education. Earnings can grow without annual federal income tax, and qualified withdrawals are generally federally tax-free when used for eligible education expenses. Federal rules also permit certain unused 529 assets to be rolled to the beneficiary's Roth IRA if multiple requirements are met, including a lifetime transfer cap.

The tradeoff is purpose: a 529 receives favorable tax treatment because the money is tied to qualifying uses and rules.

6. What about a custodial Roth IRA?

A Roth IRA becomes relevant when the child has taxable compensation. For 2026, total traditional and Roth IRA contributions generally cannot exceed $7,500 or the individual's taxable compensation for the year, whichever is less.

So a teenager with $4,000 of qualifying compensation generally cannot contribute $7,500 just because a parent or grandparent is willing to provide the cash. The compensation requirement still matters.

7. What about a custodial brokerage account?

A UGMA or UTMA custodial account is much more flexible about what the money can eventually support. But taxable investment income rules can apply, and the assets belong to the child. Control generally transfers to the child at the age specified by applicable state law.

That means flexibility has a cost: fewer account-specific tax advantages and less long-term control for the adult who funded it.

Side-by-side: what is each account built to do?

What could $1,000 become?

The pilot contribution is also a useful way to see what time can do. Use the calculator below to change the child's age, starting amount, annual family contribution, return assumption and investment cost. This is a hypothetical illustration, not a forecast.

Fees matter more when the timeline is measured in decades

When a child may invest for 50 or 60 years, a small recurring cost has a long time to compound. That is why the proposed 0.10% expense ceiling for eligible Trump Account investments is noteworthy — and why investment expenses deserve attention in any account.

A practical decision path

1. Check pilot eligibility.If the child was born in 2025–2028, confirm citizenship, Social Security number and election requirements.
2. Define the job for the money.Education, retirement and flexible early-adult spending are not the same objective.
3. Ask when the money may be needed.A 10-year horizon and a 60-year horizon support very different choices.
4. Check whether the child has taxable compensation.That determines whether a Roth IRA contribution is even available.
5. Compare access and control.Tax advantages often come with restrictions; custodial assets also eventually belong under the child's control.
6. Compare costs.Small annual expenses can become meaningful over decades.

Primary sources

1. Internal Revenue Service — Working Families Tax Cuts / Trump Accounts. Current IRS overview of eligibility, funding date, the $5,000 general contribution framework and $1,000 pilot contribution. IRS overview
2. Internal Revenue Service — Proposed regulations on eligible investments for Trump Accounts. Proposed investment definitions, broad U.S. equity-index requirement, leverage restriction and 0.10% expense ceiling. IRS proposed regulations
3. Internal Revenue Service — IRA contribution limits. 2026 IRA contribution limit and taxable-compensation rule. IRS IRA limits

Keep going

← Back to Money Now