This is part 1 in a 3-part series on Trump Accounts. In summary, Trump Accounts are free money for...
Trump Accounts Part 2: What makes a Trump Account different from a 529 Plan?
Trump Account Information
A child’s investment account that functions like a traditional IRA at 18. If your goal is giving a child a long-term investment head start with broader flexibility later, a Trump Account is more like a starter retirement fund.
Purpose of Trump Accounts
- Long-term wealth building / retirement focused
- Can also be used (with rules) for things like education or first home
Trump Account Tax Treatment
- Contributions are after-tax (no deduction)
- Growth is tax-deferred
- Withdrawals are taxed as ordinary income
- 10% penalty before age 59½ (unless exception applies)
Government Contribution to Trump Accounts
- Eligible children (born 2025–2028) may receive a $1,000 federal seed contribution
Trump Account Contribution Limits
- Up to $5,000 per year per child
Trump Account Investment Options
- Limited to low-cost U.S. index funds (passive investing approach)
Trump Account Control
- Child owns it
- Converts to IRA-style account at 18
- Full adult control at 18
529 Plan Account Information
State-sponsored education savings plan. If your primary goal is paying for college efficiently, 529 plans are typically more tax advantaged.
Purpose of a 529 Plan
- Specifically for education expenses
529 Plan Tax Treatment
- Contributions are after-tax
- Growth is tax-free
- Withdrawals are tax-free if used for qualified education expenses
- Non-qualified withdrawals = income tax + 10% penalty on earnings
Government Contribution to 529 Plans
- No federal seed money
- Some states offer tax deductions/credits for contributions
529 Plan Contribution Limits
- Very high lifetime limits (often $300K–$500K+, varies by state)
529 Plan Investment Options
- Age-based portfolios
- Mutual fund portfolios selected by the plan
529 Plan Control
- Parent (account owner) keeps control
- Beneficiary can be changed to another family member
Key Differences Between Trump Accounts and 529 Plans
| Feature | Trump Account | 529 Plan |
| Main Goal | Long-term investing / retirement | Education |
| Tax-Free Withdrawals | No | Yes (if for education) |
| Early Withdrawal Penalty | Yes before 59½ (unless exception) | Yes (if not for education) |
| State Tax Benefits | No | Often yes |
| Who Controls at 18 | Child gains control | Parent keeps control |
Please note that information regarding Section 530A (Trump) accounts is still evolving and is not final. To ensure you receive the most updated information, please refer to IRS.gov or Trumpaccounts.gov.
Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
