Same contributions, same index fund, three wrappers. Held until retirement and converted to a Roth along the way, the Trump Account is the strongest. Accessed any earlier, it is the weakest, and a plain custodial account is better.
| Cashed out at age | 18 | 30 | 40 | 50 | 60 | 65 |
|---|---|---|---|---|---|---|
| Custodial index fund | $196,374 | $414,750 | $785,551 | $1,498,777 | $2,870,646 | $3,976,163 |
| Trump Account, left as an IRA | $176,698 | $352,151 | $657,354 | $1,257,736 | $2,791,987 | $3,905,511 |
| Trump Account converted to Roth | $176,698 | $425,143 | $742,945 | $1,343,327 | $3,639,690 | $5,104,853 |
Underlined figure: the most after-tax value at that age. The Roth path only takes the lead for good once the penalty window closes. Its narrow edge at 30 rests on the conversion exception: converted amounts are treated as coming out without the 10% surcharge, while the growth on top is still taxed and surcharged before 59½. Strictly, slices younger than five years would owe the surcharge too, which would trim the age-30 figure; and because the exception never covers growth, it cannot rescue an early cash-out at any later age.
The Trump Account cannot be touched before 59½ without ordinary income tax and a 10% surcharge on every dollar of growth. If there is any real chance the money is spent on college, a first house, or a business, the custodial account is the right vehicle and the Trump Account should hold the $1,000 seed alone.
What the early-withdrawal tax and surcharge give up at age 40 against a custodial account holding the same fund.
The account becomes the child’s own traditional IRA at 18, worth $212,298 here. Converting it in ten slices across ages 22 to 31, while they are in school or early in a career, taxes the growth at roughly 15% rather than the 24% or more they would face later: about $37,761 of tax in total, which the parents can pay as a gift of roughly $3,800 a year. Everything after that compounds and comes out tax free.
Left as an IRA it turns capital gains into ordinary income, and deferral alone does not repay that: still $70,652 behind a custodial account at 65. Open the account for the seed regardless, then direct real savings to the custodial account, a 529, or a Roth IRA once the child has earned income.
Conversion income lands in the child’s own return, so it can reach financial aid, health subsidies, and income-driven loan payments; and each slice carries its own five-year clock before the converted amount can come out without the surcharge, an exception that never extends to the growth. The larger risk is human: at 18 the account is theirs, and the plan needs their cooperation for four decades.
Notes. Custodial dividends are taxed annually under 2026 kiddie tax tiers to age 18 and at 15% after. Trump Account contributions return as basis; the seed and all growth are ordinary income. Conversion tax is paid outside the account and is excluded from the balances shown. Nominal dollars, no state income tax, fees and inflation not netted out. Account rules per IRS Notice 2025-68; contributions permitted from July 4, 2026.