Readers with personal finance questions can now get expert insight through the Lebo Beat. John McGowan, financial advisor with Carson Wealth will answer select reader-submitted questions and provide professional guidance on topics such as investing, retirement, estate planning, taxes, and other financial matters. If you have a question, you would like considered for a future column, email it to info@lebobeat.com. Here is the first answer to question submitted by a Lebo Beat reader.
Hi, I would like to invest some money for my child/grandchild, but I am not sure which type of account is best?
– Beth Whitfield
Hi Beth. Thank you for your question. There are a number of great options out there, and the right choice can vary based on your specific situation. Any recommendation should first consider the financial goal you are saving towards. For education savings, a 529 account is likely the best option. If you prefer an account with less restrictions and would like the beneficiary to have some extra spending money after graduation, for a major purchase like a home, then a custodial account is best. If the child is currently working, a Roth IRA would be a great option, or if simply seeking a jump start for retirement, a Trump account might be best.
In certain states, including Pennsylvania, you can receive a tax deduction for contributions to a 529 account. Withdrawals can be taken tax free, and, with the recent tax law changes, the funds can be used for trade schools and certifications in addition to traditional college tuition. For any funds that are not spent on college, up to $35,000 can be transferred to a Roth IRA for future retirement. Keep in mind, however, if the funds are used for any purposes other than education, there is a 10% penalty on the withdrawals in addition to ordinary income tax.
A custodial account offers flexibility since the funds can be used for any purpose that benefits the child. In Pennsylvania, the account is managed by the owner until the beneficiary reaches age 21, at which point ownership transfers to the child, and they gain full control of the assets.
If the child is working, a Roth IRA can be one of the most powerful tools for retirement savings. In 2026, you can contribute up to $7,500 of their annual earnings to a Roth IRA. These funds will grow until retirement at which time can be withdrawn tax free. In addition, contributions can generally be withdrawn at any time without taxes or penalties.
Trump accounts are new and carry similar characteristics to traditional IRAs with some extra benefits. If the child was born between 2025-2028, the U.S. government will contribute $1,000 to the account. These funds grow tax deferred until retirement — there is, however, a flexibility clause that allows the funds to be withdrawn for major life events after age 18 such as college, buying a home, or starting a business. Keep in mind, again, that every dollar taken is taxed as ordinary income. If you withdraw prior to age 59.5, aside from a major life event, the withdrawal carries an additional 10% penalty on top of the ordinary income taxes.
John McGowan, CFA, MBA, of Carson Wealth will answer select reader-submitted questions and offer professional insights on investing, retirement planning, estate planning, taxes and other personal finance topics.
Have a financial question you’d like addressed in a future column? Email your question to Pittsburgh@carsonwealth.com. Selected questions may be featured in an upcoming edition.
