How a Hidden Twist Could Keep Trump Account Savings Tax-Free Forever

How Trump Accounts Work

The Trump Accounts created under the One Big Beautiful Bill Act (OBBBA) are government-funded investment accounts designed to help children build wealth from birth. Babies born between Jan. 1, 2025, and Dec. 31, 2028, will automatically receive a one-time $1,000 deposit from the government.

For parents of children born in that window, opening a Trump Account is a no-brainer. The government sets up the account and provides the seed money, and then the funds can compound over decades into a modest nest egg—all at no cost to the family.

But Trump Accounts aren’t just for newborns. Families with children up to age 18 can open one and contribute up to $5,000 per year. That’s where the hidden twist comes in: At age 18, the account converts to a traditional IRA, which can then be converted to a Roth IRA—creating a powerful opportunity to build tax-free wealth no matter the initial age of the Trump Account owner.

The Roth IRA Twist Flying Under the Radar

Under IRS guidance, once a child turns 18, all contributions made to a Trump Account before that year—along with any earnings—are treated as a traditional IRA. Those balances are also eligible to be converted to a Roth IRA.

That matters because traditional and Roth IRAs are taxed very differently. Traditional IRAs are funded with pretax dollars and taxed when money is withdrawn. Roth IRAs flip the formula: Taxes are due upfront, but qualified withdrawals later on are tax-free.

For many young adults, it’s an unusually good moment to make that switch. Earnings are often low enough to fall into the 0% federal income tax bracket, which means converting a traditional IRA to a Roth IRA could trigger little or no tax at all.

When money is converted from a traditional IRA to a Roth, the converted amount counts as taxable income. But as long as total income—including the converted amount plus any wages they earn—stays within the 0% bracket, no federal income tax is owed. That may allow account holders to convert part of the balance each year while keeping their tax bill at zero.

In practical terms, converting during these early, low-income years can lock in tax-free growth for decades—turning what starts as a children’s savings account into a lifelong tax advantage.

A Unique Advantage: IRA Contributions Without Earned Income

Normally, kids can only open a Roth IRA if they have a job and report earned income. That leaves many young people out, since casual work like babysitting or dog-walking doesn’t qualify if they are paid in cash. Trump Accounts bypass that barrier by allowing up to $5,000 in annual contributions regardless of earned income, with up to half of that potentially coming from a parent’s employer if the benefit is offered.

If Trump Account contributions can later be converted into a Roth IRA, the money would not only grow tax-free, but also come out tax-free—potentially transforming what once looked like a second-tier account for kids into a powerful wealth-building tool for young adults.

The Bottom Line

Trump Accounts were designed as a simple way to help kids start saving. But IRS guidance clarifies that the balance converts to a traditional IRA at age 18—and can then be converted to a Roth IRA when taxes may be lowest. Because contributions don’t require earned income, the accounts also create a rare path to IRA savings for young people paid only in cash. For families thinking ahead, that timing could turn a small account into tax-free savings for life.