Parents and loved ones saving for a child’s future have lots of options. Now, due to legislation passed in 2025, there’s a new, but different, savings option referred to as “Trump Accounts”. We break down the differences between a 529 account and a Trump account below so you have more information when making savings decisions for you and your family. 

What Are Trump Accounts?

The authorization for “Trump Accounts” is found within the hundreds of pages of H.R. 1 (federal legislation passed in July of 2025). Here's how Trump Accounts work.

• These accounts are structured as custodial traditional IRAs for minors and became available for contributions starting July 4, 2026. 

• Children born between January 1, 2025, and December 31, 2028, may qualify for a one-time $1,000 seed deposit from the U.S. Treasury.

• You can contribute up to $5,000 per year per child (indexed for inflation after 2027), and the money grows tax-deferred until the child turns 18.

• When the child turns 18, the account converts into a traditional IRA and follows standard IRA rules. Importantly, no withdrawals are permitted before the child turns 18.

• After the child turns 18, withdrawals for higher education are allowed without penalty but are taxable as ordinary income.

For families with children born in the eligible window, signing up for a Trump account to claim the $1,000 federal contribution makes sense. However, most financial experts agree that Trump Accounts should complement a 529 plan, not replace it, for families focused on education savings.

Why 529 Accounts Shine for Education Saving 

While Trump accounts offer what is essentially an early government-seeded IRA account, 529 accounts offer powerful benefits for those who are saving for their child or loved one’s future education – even as early as kindergarten. They offer: 

• Tax‑free growth and withdrawals for education expenses: Money in a 529 account grows tax-free and, when used for qualified education expenses, can be withdrawn tax-free. This is a significant advantage of 529 plans. 

• Flexible and expanded uses: You can use the money in a 529 plan for a variety of educational expenses, including college tuition, K-12 tuition, apprenticeship expenses, books and technology needs, credentialing and more. In fact, legislation passed in 2025 expanded the ways a 529 plan can be used for K-12 expenses. In addition to K-12 tuition, you can now use 529 funds for things like standardized test fees and tutoring.   

• State-level tax perks: Many states offer deductions or credits for 529 contributions. New Mexico residents can deduct all eligible contributions from their state taxable income each year. These deductions don’t exist for Trump accounts.

• Roth IRA Rollover: For parents who worry that their child won’t use the funds in a 529 account if they get significant scholarships or choose an alternative career path that doesn’t require a college degree, 529 plans offer additional flexibility. Unused funds in a 529 can be rolled into a Roth IRA in the beneficiary’s name, giving your savings a second life as retirement funds even if education plans change.

• Multiple "exit" options if college isn't in the picture: 529 plans offer families real flexibility if a child doesn't pursue a traditional college path. You can change the beneficiary to another family member (including yourself), use the funds for apprenticeships, trade school, or credentialing programs, roll unused funds into a Roth IRA, or take a non-qualified withdrawal subject to taxes and a 10% penalty. Trump Accounts, by contrast, are generally locked until age 59.5, though traditional IRA rules do allow some penalty-free early withdrawals for situations like higher education expenses or a first home purchase. The catch: even those exceptions are still taxed as ordinary income. With a 529, qualified education withdrawals are completely tax-free. That distinction means your 529 savings are far more flexible and far more valuable if your child's path changes.
   

Direct Comparison

The Bottom Line

Trump accounts offer a new savings vehicle for families, but they don’t match the education-specific power of a 529 plan. With the flexibility to be used for a wide variety of educational expenses and powerful tax advantages, and with robust “exit” options if a child’s plans change, 529s still offer the best way for families to save for their loved ones’ future education.  Don’t limit your options by thinking you have to choose one – evaluate how each might fit into your savings plan and future goals. Ready to build a bright future? Start a 529 account with The Education Plan® today.