Saving for retirement can be hard—so hard that many people wish they could have started from the moment they were born. Good news for future savers: That’s now possible with a Trump Account, a custodial-style IRA designed for kids. Plus, the account can be converted to a Roth IRA for tax-free growth potential.
What are Trump Accounts?
Created under federal law in 2025, Trump Accounts offer low-cost index investing, a $5,000 annual contribution limit, and, notably, a $1,000 seed contribution from the government for American citizens born from 2025 through 2028. Generally, access to the money in the account is restricted until adulthood, throughout the "growth period," which ends on December 31 in the year before the child turns 18. At that point, Trump Accounts function like traditional IRAs. Withdrawals of any earnings and the $1,000 seed contribution, if applicable, are taxable and may be subject to an early withdrawal penalty. Individual contributions to the account are made on an after-tax basis.
The year the child turns 18, families can leave the account as is, or they may consider converting it to a Roth IRA. That could unlock decades of tax-free growth potential and compounding.
“But getting the timing right can be key,” says Andrew Bachman, director of tax and retirement income for Fidelity’s Financial Solutions Team. “While families will be able to convert when the child turns 18, the kiddie tax may apply until age 24. Waiting to convert could potentially cut the tax bill that comes with a Roth conversion.” Read Viewpoints: Why convert to a Roth IRA now?
Here's what to know.
Why convert a Trump Account to a Roth IRA?
Contributions to a Roth IRA are made on an after-tax basis and any potential earnings grow tax-free. Contributions to a Roth IRA can always be withdrawn tax-free. Qualified withdrawals of earnings are tax-free if certain requirements are met.1 A Roth conversion moves money from a pre-tax account, like a traditional IRA, into a Roth IRA, which means paying taxes now in exchange for potential tax-free growth later.
That trade-off can be appealing for young investors with a long time horizon. But age plays a key role in how that conversion will be taxed.
At what age should you convert a Trump Account to a Roth IRA?
For many young adults, converting too early could mean paying more in taxes than expected because of the kiddie tax.
The kiddie tax applies to a child’s unearned income—such as investment gains. Withdrawals or conversions of earnings, as well as amounts that do not create basis, such as the $1,000 government seed contribution, would be treated as unearned income.
Here’s how it works in 2026: The first $1,350 of a child’s unearned income is generally not taxed, and the next portion is taxed at the child’s income tax rate. Income above $2,700 may be taxed at the parents’ tax rate under the kiddie tax rules. These thresholds are adjusted periodically for inflation.
The kiddie tax typically applies to:
- Children under age 18
- 18-year-olds who don’t support themselves (generally meaning they cover less than half of their own expenses)
- Full-time students under age 24 who don’t have earned income that covers more than half of their support
“That means a conversion at age 18 could be taxed differently than the same conversion at age 24,” Bachman says. “By age 24, the kiddie tax no longer applies, so conversions are taxed at the account owner’s own rate.”
To learn more about the kiddie tax, read Viewpoints: What to know about the kiddie tax
Why timing matters when converting a Trump Account to a Roth IRA
Imagine a young adult with a Trump Account who is considering a Roth IRA conversion. In this example, the taxable portion of the conversion is $10,000 because it consists of accumulated investment earnings and the government seed contribution. The parents earn $150,000 and are in the 22% tax bracket. By age 24, the young adult is earning $40,000 and is in the 12% tax bracket.
Converting a Trump Account to a Roth IRA at age 18 vs. 24
| Convert at age 18 | Convert at age 24 | |
|---|---|---|
| Taxable conversion amount | $10,000 | $10,000 |
| Kiddie tax treatment | Kiddie tax applies. | Kiddie tax does not apply. |
| Amount taxed at child’s rate | $2,700 total: $1,350 taxed at 0% and $1,350 taxed at 10%. | Full $10,000 taxed at the young adult’s rate. |
| Amount taxed at parent’s rate | $7,300 taxed at the parents’ 22% rate. | $0 |
| Estimated tax bill | $135 child-rate tax + $1,606 parent-rate tax = $1,741 | $10,000 x 12% = $1,200 |
| Key takeaway | Converting at 18 could mean part of the tax bill is calculated using the parents’ higher tax rate. | Waiting until the kiddie tax no longer applies could reduce the tax bill, depending on the young adult’s income and tax rate. |
| Assumptions | The 18-year-old is a full-time student and does not have earned income that covers more than half of their support. The parents are in the 22% tax bracket. | The young adult earns $40,000 and is in the 12% tax bracket. |
For hypothetical illustration only. Source: Fidelity Investments
In this example, waiting until age 24 reduces the estimated tax bill from $1,741 to $1,200, a difference of $541. But the benefit of waiting depends on the young adult’s income and filing status at the time of conversion. This example assumes the young adult has significantly less income than their parents at age 24. If they are earning a relatively high salary by age 24, the tax savings could be smaller or may disappear.
Taxes are only one part of the equation. If the account grows substantially between ages 18 and 24, the taxable conversion amount could be larger, which may reduce or even outweigh the tax benefit of waiting. Conversely, if the account declines in value, the taxable amount may be smaller. the taxable portion may be smaller, potentially reducing the tax cost of converting, even if it happens before age 24. Of course, future market movements are unpredictable.
This example does not account for the potential effect of state and local taxes, which may affect the estimated tax bill. Importantly, the decision of when to convert may hinge on who is willing to pay the tax bill. No parent wants to be surprised by a tax bill on their return when they expected it to be on their child’s.
Should you convert the full Trump Account at the end of the growth period or take a phased approach?
In some cases, a phased approach—converting smaller amounts over several years—may help manage the tax impact and give your money a shot at beginning to grow tax-free earlier.
This can help keep taxable income within the lower kiddie tax thresholds, where more of the income is taxed at the child’s rate rather than the parents’ higher rate.
For example, imagine the same scenario as the example above: a $10,000 conversion, all of which is taxable because it consists of earnings and the government seed contribution. Rather than converting it all at age 18, when a portion could be taxed at the parents' 22% rate, the investor could spread conversions over a couple of years.
If they convert roughly in line with the annual kiddie tax thresholds, some of that income may be taxed at 0% or 10%, limiting how much gets pushed into the higher parental rate. The exact amount would depend on the kiddie tax thresholds in effect for that year.
Another variation is a hybrid of the 2 approaches: converting smaller amounts between ages 18 and 23 to take advantage of lower brackets, then completing any remaining conversion at age 24, when the kiddie tax no longer applies. At that point, if the young adult has little or no income, some or all of the remaining amount could be taxed at a very low rate—or potentially offset by the standard deduction.
Each approach involves tradeoffs. Spreading conversions out can lower the tax cost, but waiting longer may delay the benefit of tax-free growth potential inside a Roth IRA. The right balance will depend on factors like income, tax brackets, and how much is being converted.
Tax rules and account guidance may evolve. Checking in periodically can help ensure your strategy stays aligned with current laws.
What to consider before converting a Trump Account to a Roth IRA
One key consideration is how you’ll pay the taxes on a Roth conversion. In some cases, the tax bill could be significant, especially for larger balances. Using money from the Trump Account itself to cover that cost may seem convenient—but it can backfire by triggering additional taxes and a 10% early withdrawal penalty. If possible, using money outside the account may help preserve more of the account’s long-term growth potential.
If the child owns other traditional IRAs, the conversion will be calculated on an aggregate basis that includes all traditional IRA funds.
Understanding the Roth conversion 5-year rule is important as well. While Roth contributions can be withdrawn tax-free at any time, Roth conversions have their own rules. The account owner may need to wait up to 5 years before being able to access the funds penalty-free.
How 529 to Roth IRA transfers can fit in
For families using multiple savings tools, 529 plans can add another layer of flexibility.
Under certain conditions, you can transfer tax- and penalty-free up to a lifetime limit of $35,000 from a 529 to a Roth IRA established in the name of the 529 beneficiary. The 529 plan must have been maintained for the beneficiary for at least 15 years. Transfers are subject to annual Roth IRA contribution limits and must come from contributions made at least 5 years before the transfer date.2 Read Viewpoints: How unused 529 assets can help with retirement planning
This can help fund a Roth IRA without triggering taxable income and provide another path to potentially tax-free growth and withdrawals in retirement.
Used together, Trump Accounts and unused 529 plan assets can offer complementary ways to build Roth retirement savings early. Read Viewpoints: How to use Trump Accounts to save for kids
The bottom line on converting Trump Accounts to Roth IRAs
Trump Accounts create a new opportunity to invest early for a child’s future—but they also introduce new decisions once that child reaches adulthood.
Once the Trump Account functions as a traditional IRA, the key question for many families may not be whether to convert it to a Roth IRA, but when and how to do it.
A few approaches to consider:
- Convert earlier, understanding that the kiddie tax may apply
- Wait until age 24 or later, when conversions are taxed only at the individual’s rate
- Take a phased approach, converting smaller amounts over time to help manage taxes
Other options, like 529-to-Roth rollovers, may provide ways of funding a child’s Roth IRA without the need for taxable conversions.
The right strategy will depend on factors like income, tax brackets, and timing. Taking a thoughtful approach could help keep more of those early savings invested—and working toward long-term, tax-free growth.
Because Trump Accounts are new and tax rules may evolve, revisiting your plan periodically can help ensure it continues to fit your goals. Consult a tax advisor regarding your specific situation.