Roth IRAs, Trump Accounts, and the Planning Lesson Parents and Grandparents Should Not Miss

A recent Schwab example caught my attention because the math is simple and powerful.

If a teenager contributes $2,300 per year to a Roth IRA from age 15 through age 65, that is $115,000 of total contributions. At a hypothetical 6% annual return, the account could grow to more than $700,000.

No massive contribution. No exotic strategy. Just time. That's the power of compounding, which Warren Buffet called the greatest force in Nature. A dollar invested for a teenager has decades to work. A dollar invested at 45 does not have the same runway.

But before parents or grandparents rush to fund a child’s Roth IRA, there is one important rule: the child needs earned income. Allowance does not count. Gifts do not count. Investment income does not count. The child needs wages, self-employment income, or other qualifying compensation.

For business-owner families, this can create a real planning opportunity. If a child legitimately works in the business, is paid a reasonable wage, and the work is properly documented, that income may support a Roth IRA contribution.

The work should be real. The pay should be reasonable. The records should be clean. This is not something to invent at tax time after the money has already moved.

For example, assume a 15-year-old earns $3,000 from legitimate work in the family business. If the rules are met, that child may be able to contribute up to $3,000 to a Roth IRA.

At a hypothetical 6% annual return, that single $3,000 contribution at age 15 could grow to roughly $55,000 by age 65.

That is one year of planning. Repeat the habit over time, and the numbers become meaningful.

Where Trump Accounts Fit In

Families now have another child-focused planning tool to understand: Trump Accounts

A Trump Account is a new type of traditional IRA for eligible children. It is not the same as a Roth IRA, and it should not be treated as a replacement for one. You can do both if there is also earned income.

The headline feature is the potential $1,000 federal pilot contribution. Under current rules, that contribution is generally available for eligible children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with valid Social Security numbers.

A child may be eligible to have a Trump Account opened, but only children born during that 2025–2028 window qualify for the federal $1,000 pilot contribution.

For parents and grandparents, this is not about chasing every new account type. It is about understanding which tools fit the child’s age, income, tax situation, and long-term plan.

Roth IRA vs. Trump Account

A Roth IRA is usually most powerful when the child has earned income and a long time horizon. The contribution is made with after-tax dollars, and qualified withdrawals may be tax-free later.

A Trump Account is different. It is a traditional IRA structure with special rules during the child’s growth period, including restrictions on investments, contributions, and distributions.

For some children, the Roth IRA may be the better long-term compounding tool. For others, the Trump Account may provide a useful starting point, especially if the child qualifies for the federal pilot contribution. For many families, the right answer may involve more than one account, coordinated with 529 plans, custodial accounts, taxable investment accounts, and the family’s broader wealth plan.

The Planning Lesson

The Schwab example is not really about Roth IRAs. The Trump Account rules are not really about a $1,000 contribution. The bigger lesson is that small decisions made early can compound into meaningful results when they are done consistently and correctly. That applies to retirement accounts, family payroll and other tax planning issues that we help clients with at Realm Tax.

Good planning rarely happens by accident. It usually happens because someone slowed down, looked at the facts, and made the right move before the opportunity passed.

Schedule a Planning Review

Realm Business and Tax Advisory works with business owners, high-net-worth individuals, and real-estate owners who want better tax planning, stronger financial visibility, and a more coordinated approach to long-term decisions.

If you own a business and are considering family payroll, Roth IRA contributions for children, Trump Accounts for children or grandchildren, or broader family tax strategy, schedule a review to see whether these opportunities fit your situation.