Save yourself the political angst, as I'm going to educate as a fiduciary on why you should open and fund a Trump Account for your child. Let me repeat: "educate as a fiduciary."

Building generational wealth via disciplined investment, forward-thinking tax planning, and unapologetic pragmatism shouldn't be partisan. Parents and grandparents need to look past political branding and understand this financial opportunity starting July 4 through the U.S. Treasury via IRS Form 4547, then deployed to major institutions, including Schwab, Fidelity, and Vanguard.

Reality Beyond Reels

Media outlets and social influencers are hyper-focused on flashy elements: the narcissistic naming, Michael Dell's $6.25 billion gift, and the one-time $1,000 newborn cash seed funded by the U.S. government for 2025-2028.

This noise has millions of parents completely ignoring the program, assuming their older children aren't eligible or out of political disdain. What a massive financial planning error.

The truth is any U.S. citizen under 18 with an SSN qualifies for a parent or grandparent established Trump Account. The real opportunity is investing up to $5,000 annually tax-deferred, which transitions directly into a Traditional IRA in the child's name at age 18. Free of spending restrictions, this complements a 529 plan.

Doing 10-year-old math

Say you have a 10-year-old and max contribute $5,000 prior to each December 31 deadline until they turn 18. Your total out-of-pocket investment over those eight years is $40,000.

Treasury mandates require these funds to be placed in diversified, low-fee index funds mirroring benchmarks like the S&P 500 (which has averaged 10.5% historical annual return since its 1957 inception). Assuming a 10% annualized return over that eight-year window, this 10-year-old's account grows to $62,897 by age 18-meaning $22,897 is investment growth.

The age-18 IRA handoff

At age 18, regulations dictate the account must transition directly into a Traditional IRA under the child's control. Because your original $40,000 in contributions was made with after-tax dollars, it carries over into that Traditional IRA as a non-deductible basis, meaning the principal can eventually be withdrawn tax-free. Why is this important?

The Roth conversion strategy

Instead of leaving this IRA to compound for a massive tax bill down the road, the optimal wealth-building move at age 18 is a full Roth IRA conversion. As a student entering adulthood with little to no earned income, they can exploit their standard deductions and baseline federal tax brackets to effectively neutralize the conversion tax.

Due to pro-rata rules governing Roth conversions, your 18-year-old will owe ordinary income taxes only on the converted growth portion ($22,897) on their own tax return, not yours.

Consider an 18-year-old Massachusetts student with zero personal income:

• Federal Tax: Standard deduction shields the first $16,100 of growth. The rest falls into the 10% bracket, resulting in a $680 tax bill.

• State Tax: Massachusetts applies its $4,400 personal exemption, then levies its flat 5% tax for a $925 obligation.

For $1,605 paid in taxes, this Massachusetts 18-year-old has converted the entire $62,897 into a Roth IRA. So, what now?

A $3.4 million Roth IRA by age 60

If this Roth IRA is left untouched to compound at 10% annually with $0 further added, the account will swell to over $3.44 million by age 60-entirely tax-free upon distribution.

The truth is $3.4M today isn't the same as $3.4M in 50 years. However, by demonstrating the power of compounding through incremental investment, you lay the behavioral foundation for your child to keep saving and investing during their career.

Ignore at your own peril, but be prepared in 20 years for: "Mom, Dad, what happened? Why didn't you choose to do this?"

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Glenn Brown is a Holliston resident and owner of PlanDynamic, LLC, . Glenn is a fee-only Certified Financial Planner™ helping motivated people take control of their planning and investing, so they can balance kids, aging parents and financial independence.

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