3 Things 3-09-26

 Thing One

The $2.7 Million Opportunity Most Parents Might Miss (More On The Trump Accounts)

(The following is a synopsis of insights shared in article summarized by financial advisor Fran Walsh, CFA, co-founder of Opulus LLC)

Parents are always looking for ways to give their kids a financial head start. According to financial advisor Fran Walsh, one new savings vehicle could potentially grow into millions for children who start early.

Walsh recently highlighted the potential impact of what are being called “Trump Accounts.” The idea is simple: start saving for your child early, contribute consistently, and let compounding do the heavy lifting.

Imagine two families with the same income and a 4-year-old child.

• One family opens a Trump Account before the filing deadline.

• The other assumes the program only applies to newborns and does nothing.

According to the projections, the difference could be dramatic. By age 65:

• One child could potentially have around $2.7 million.

• The other could have nothing saved through this program.

The key driver isn’t complexity—it’s time in the market.

One of the biggest misunderstandings Walsh addresses is eligibility.

Many people believe the accounts are only available to children born between 2025 and 2028. That’s not the case.

• The $1,000 government seed contribution applies only to newborns during those years.

• The account itself can be opened for any child under 18.

That means parents of kids who are 4, 8, 12, or even 16 years old could still participate.

How the accounts work:

• Annual contribution limit: $5,000 per year

• Who can contribute: Anyone—parents, grandparents, relatives, friends, even employers

• No earned income requirement (unlike Roth IRAs for minors)

• Tax-deferred growth, typically invested in low-cost U.S. equity index funds

• Account ownership transfers to the child at age 18

Once the child becomes an adult, the account can continue growing or be withdrawn with tax treatment similar to a traditional IRA.

Additional Features Many Families Don’t Know

• Contributions do not reduce a child’s Roth IRA limit if they also qualify for one later.

• Some employers may contribute up to $2,500 per year tax-free.

• Certain areas may receive an additional $250 contribution from the Dell Foundation, depending on location.

The Power of Starting Early

Walsh modeled potential outcomes assuming contributions of $5,000 per year until age 18 and an average 7% annual return afterward.

Approximate projections look like this:

• 4-year-old: about $2.7 million by age 65

• 8-year-old: about $1.7 million

• 12-year-old: about $900,000

• 16-year-old: about $249,000

The takeaway is clear: the earlier contributions start, the greater the long-term compounding effect.

Getting Started:

1. Download IRS Form 4547.

2. File it with your 2025 tax return (due April 15, 2026).

3. Alternatively, use the online portal once contributions officially open July 4, 2026.

Thing Two  

Avoiding the Widow's Penalty: How a Smart Roth Conversion Saved This Couple $1.2 Million

Imagine you're in your mid-50s, with $2 million socked away in retirement accounts after years of diligent saving. You're doing everything "right"—maxing out 401(k)s, planning for Social Security, and eyeing a comfortable retirement. But lurking in the shadows is a tax trap that could cost you over a million dollars: the widow's penalty.

This is the story shared by CPA and retirement planner Kurt Supe on X, highlighting a real couple—he's 61, she's 56—on the brink of leaving $1,205,543 on the table. The issue? When the husband passes first (a common scenario statistically), the surviving spouse shifts from married filing jointly to single filer. Suddenly, the same income faces nearly double the tax rates, turning their $1.4 million in pre-tax 401(k)s into a Required Minimum Distribution (RMD) nightmare starting at age 73.

The chart acompanying the analysis paints a stark picture: Without action, their taxable income creeps into higher brackets—22%, 24%, even 32%—as RMDs balloon over time. But with a strategic twist? Enter the 12% bracket Roth conversion.

The Strategy: Roth Conversions in the "Gap Years"

The fix isn't about chasing higher returns or taking on more investment risk. It's pure tax planning: During the years between early retirement and RMD age (typically 60s to early 70s), convert portions of traditional IRA or 401(k) funds to a Roth IRA, paying taxes now at today's lower rates.

• Why 12%? Target conversions that keep your taxable income within the 12% federal bracket (for 2026, up to about $94,300 for married filers). This minimizes the upfront tax hit while shifting funds to tax-free growth and withdrawals in a Roth.

• Timing is key: Do this before Social Security or pensions kick in fully, filling those low-bracket "gaps" without pushing into higher taxes.

• The widow's shield: Post-conversion, the Roth assets grow tax-free, and withdrawals don't count as taxable income—protecting the survivor from bracket jumps and reducing overall lifetime taxes.

The conversion strategy keeps adjusted taxable income low and steady, hugging the 12% bracket through ages 61 to 91. The no-conversion path? It spikes into 24% and beyond, eroding wealth.

The Payoff: More Than Just Tax Savings

Running the numbers with the same portfolio assumptions, Social Security, and retirement timeline:

• Probability of success: Jumps from 90% to 95% (meaning a higher chance their money lasts).

• Projected ending assets: $10,097,282 with conversions vs. $8,778,918 without— a $1.2 million difference purely from tax efficiency.

• Bonus perks: Roth funds have no RMDs, offering more control over income, potential for legacy planning, and insulation against future tax hikes.

Is This for You?

If you're 50+ with significant pre-tax savings, run your own numbers. Tools like retirement calculators or a fiduciary advisor can model scenarios. But remember, this isn't one-size-fits-all—factors like state taxes, health, and market returns matter. And as replies to Supe's post note, it assumes some "gap years" with lower income; high earners might need tweaks.

Bad tax planning can silently sabotage even the best savers. As Supe asks: How much is it costing you? Consult a pro to uncover what's hiding in your plan—before it's too late. 

Thing Three

Just A Thought  

"To get what you want, stop doing what isn't working." - Dennis Weaver