The Trump accounts coming this summer let parents jump-start tax-advantaged retirement savings for a child at birth.
By the time the kids retire, they could end up with giant retirement accounts. The real power play is for parents to contribute $5,000 a year for 18 years, then help them convert the account to a Roth IRA so that it can ultimately be accessed tax- and penalty-free.
“This is the biggest win that people can have if they want to set their kids up for retirement,” said Ryan Greiser, a certified financial planner with Opulus in Doylestown, Pa. He’s planning to open accounts for his three children, ages 3, 5 and 7.
The strategy likely only makes sense after setting aside funds in other accounts for nearer-term expenses, such as college, and funding the parents’ retirement. Add it all up and a married couple with two kids might commit upward of $100,000 annually into other tax-advantaged accounts, such as 401(k)s and 529s, before even thinking about adding to Trump accounts for their kids’ retirement.