Are Trump Accounts Worth It?
Comparing 5 Ways to Build Your Child’s Wealth
As the launch of “Trump accounts” dominates the financial news cycle, many families are eager to jump on the bandwagon of government-sponsored wealth building for children. Marketed as a revolutionary tool for generational prosperity, these accounts are currently the “hot buzz” in financial planning. However, while the excitement is high, a closer examination of the statutory framework and a comparison of long-term retirement outcomes reveals that the hype may be overshadowing significantly more efficient investment strategies. For many, the Trump account may act more like a tax-deferral trap than a wealth-maximization tool.
How we modeled this comparison: To compare these strategies accurately, several assumptions have been made. This analysis assumes the taxpayer is located in Illinois and that any unearned income generated before the child turns 18 remains below the “kiddie tax” threshold, meaning dividends are not taxed at the parents’ marginal rates. For this modeling, we assume all funds are converted into new retirement vehicles at age 18—a hypothetical scenario used to facilitate comparison—and all retirement distributions are taken at age 60.
This analysis focuses on the efficiency of personal contributions; therefore, the $1,000 federal seed contribution and potential employer matches are excluded from the core calculations. Furthermore, we have not accounted for the statutory use of 529 funds for educational expenses or the specific 529-to-Roth maximum contribution limits in the growth model, focusing instead on the long-term retirement outcome of the initial investment. Other assumptions can be found in the calculation
A Tale of Five Scenarios: Comparing the Outcomes
While the Trump account is the most talked-about option, there are five primary pathways a parent might take to build a minor’s nest egg. Each carries a distinct tax profile that drastically alters the final amount available at retirement.
1 of 5
The Standard Trump Account – The Trump Account Transferred to Traditional IRA
This is the “default” path. The account grows tax-deferred until the beneficiary reaches adulthood, at which point it is treated as a standard traditional IRA. While this sounds beneficial, it creates a significant tax at retirement. Because every dollar in excess of the value of the account at age 18 withdrawn at age 60 is taxed as ordinary income, the beneficiary eventually loses a massive portion of their wealth. Among all scenarios, this typically results in the lowest net payout.
$744,000
2 of 5
The Trump Account Pivot – The Trump Account Converted to Roth IRA
In this scenario, the Trump account is maintained until age 18 and then immediately converted into a Roth IRA. This maneuver requires paying a tax bill upfront at age 18 on the total value of the account, less the contribution amount, taxed at ordinary income rates. While paying taxes early is rarely popular, it allows the money to grow entirely tax-free for the next four decades. This strategy significantly outperforms the standard Trump account because the ordinary income tax rates at age 18 are assumed to be lower than the ordinary income tax rates at retirement.
$875,000
3 of 5
The Traditional Brokerage Path – The Traditional Brokerage Transferred to Traditional IRA
Some parents prefer the flexibility of a standard, taxable investment account. In this scenario, the parent invests in a brokerage account and moves the funds into a Traditional IRA once the child starts working. Although this involves realizing gains at age 18, it outperforms the standard Trump account because those gains are taxed at favorable Long-Term Capital Gains (LTCG) rates—which are 0% in this model—rather than the ordinary income rates that eventually hit the Trump account. Furthermore, the immediate tax savings generated by the IRA contribution at age 18 can be reinvested, providing a larger base for future growth.
$826,000
4 of 5
The Traditional Brokerage Path – The Traditional Brokerage Transferred to Roth IRA
Similar to the scenario above, this involves a taxable brokerage account, but the funds are moved into a Roth IRA at age 18. The reason this outperforms the Trump-to-Roth conversion (Scenario 2) is entirely due to the tax rate applied at adulthood. In this path, you clear the tax hurdle at age 18 using the lower LTCG rate (0%) instead of the ordinary income rate (10%). By taking a smaller tax hit while the account is relatively small, the beneficiary preserves a much larger share of the final pot.
$912,000
5 of 5 · Winner
The 529 Plan to Roth IRA Conversion
The clear winner in our analysis is the 529 plan. By utilizing legislative provisions that allow for 529-to-Roth rollovers, parents can achieve the “holy grail” of investing: tax-free growth and tax-free withdrawals. Unlike the brokerage scenarios, there is no capital gains tax at age 18. Unlike the Trump account, there is no ordinary income tax at age 60. By avoiding the IRS at every single stage of the investment lifecycle, the 529 plan leaves the beneficiary with the most spendable wealth.
$949,000
The Bottom Line
The “beauty” of the Trump account lies in its simplified “on-ramp” and the initial government excitement, but it is rarely the most efficient choice for a child’s long-term wealth. The standard Trump account structure forces a child into an ordinary income tax bracket at retirement, effectively handing a large percentage of their life savings back to the government.
For families in Illinois and across the country, the math is clear: the established 529 plan remains the superior vehicle for those looking to maximize their child’s future. However, savers must keep in mind that the 529-to-Roth conversion is subject to a $35,000 lifetime limit per beneficiary and requires the account to have been maintained for at least 15 years. The Trump account may be the “hot buzz” of 2026, but the 529 plan’s path to a tax-free Roth IRA remains the smartest play from a tax perspective for building real, lasting wealth
Note: This analysis reflects modeled assumptions: Illinois state tax rates, 7% investment return, 0% LTCG rate, and contribution rules current as of publication, and is intended for general informational purposes, not individualized tax advice. Contact DSWD Advisory to discuss which strategy fits your family’s specific situation.
About DSWD Advisory
DSWD Advisory is a full-service accounting and advisory firm that was founded in 2009. Firm leadership has earned the loyalty of clients in the numerous industries they serve nationwide; in industries ranging from financial services to manufacturing and retail. The firm provides services including Accounting, Tax, Peer Review, Consulting, and more; with the goal to provide clients with a trusted advisor that is truly vested in their business. Learn more about DSWD Advisory Group LLC at www.www.dswd-advisory.com.
