By Scott Marr, CPA, MST and Sean Ellefson

For parents and grandparents, saving for a child often starts with one big question: What is the best way to help them build a strong financial future?

For years, 529 plans have been one of the most common answers, giving families a tax-advantaged way to save for education. Now, families have another option to consider: Trump Accounts, a new type of individual retirement account created specifically for children.

While both accounts are designed to help families save for the future, they serve very different purposes. A 529 plan is primarily focused on education. A Trump Account is designed to give children an early start on long-term investing and retirement savings.

Because they address different financial goals, some families may find value in using both as part of a broader savings strategy.

What Is a Trump Account?

Trump Accounts are a new type of traditional IRA that can be established for eligible children under age 18. Unlike a traditional IRA, contributions can be made during childhood even if the child does not have earned income.

One of the most notable features is the federal government’s one-time $1,000 pilot contribution for eligible children born between January 1, 2025, and December 31, 2028. To qualify, the child must be a U.S. citizen with a valid Social Security number, and an election must be made for the contribution. The $1,000 government contribution does not count toward the account’s regular annual contribution limit.

The broader purpose of the account is straightforward: give children more time to benefit from long-term investing and compounding before they even begin their working years.

How Does a 529 Plan Differ?

A 529 plan is designed primarily to help families save for qualified education expenses. Earnings can grow tax-free, and distributions generally are not subject to federal income tax when the money is used for qualifying education costs.

That can include expenses associated with college and other eligible postsecondary programs, along with certain other qualified educational expenses under current law.

In other words, the two accounts are built with different destinations in mind. A 529 plan focuses primarily on education, while a Trump Account is intended to begin building long-term retirement savings at a very young age.

Trump Accounts vs. 529 Plans at a Glance

	Trump Account	529 Plan
Primary purpose	Long-term investing and retirement savings	Qualified education expenses
Federal seed contribution	$1,000 for qualifying children born in 2025 through 2028	None
Annual contributions	Generally up to $5,000 per child during the growth period, with inflation adjustments beginning after 2027	No single federal annual contribution limit, although plan limits and gift tax rules may apply
Investment choices	Limited to qualifying low-cost U.S. index investments	Choices vary by state and program
Access to funds	Generally restricted during childhood	Available for qualified education expenses
Federal deduction for contributions	No	No
State tax benefit	No general state deduction tied to the account	May be available depending on the state
Long-term flexibility	Becomes subject to traditional IRA rules after the childhood growth period	Certain unused funds may qualify for rollover to the beneficiary’s Roth IRA, subject to requirements and a $35,000 lifetime limit

The annual Trump Account limit generally applies to individual and employer contributions, while certain government, nonprofit, and rollover contributions are excluded from that limit. 529 contribution limits, meanwhile, are generally established by the individual program, and contributions can have gift tax implications.

What Can the Money Be Invested In?

This is another important difference.

529 investment choices vary by the state and program sponsoring the account. Families may have several portfolios available, often based on investment strategy, risk level, or the beneficiary’s age.

Trump Accounts are considerably more restricted. At launch, contributions are invested in the State Street SPDR Portfolio S&P 500 ETF (SPYM), which tracks the S&P 500. Treasury has also announced four additional low-cost index ETFs intended to become available as investment choices. The rules generally require eligible Trump Account investments to track broad indexes of primarily U.S. companies and meet limitations on fees and other features.

That narrower investment structure reflects the account’s long-term purpose rather than short-term trading or more customized investment strategies.

What Happens When the Child Needs the Money?

This may be the most important distinction for families deciding where to save.

With a 529 plan, qualified distributions can generally be taken tax-free to pay eligible education expenses. There is also added flexibility for certain unused balances. Under current rules, qualifying 529 funds can potentially be rolled into a Roth IRA for the beneficiary, subject to several requirements, including a $35,000 lifetime rollover limit, annual Roth IRA contribution limits, and rules regarding how long the 529 account has been open.

Trump Accounts are designed differently. Distributions are generally prohibited during the childhood growth period, with limited exceptions. Once that period ends, the account operates under traditional IRA rules. That means taxable distributions and potential early withdrawal penalties should be considered if funds are accessed before retirement age and an exception does not apply.

The beneficiary also assumes control of the Trump Account as an adult, making it an asset intended specifically for that child’s long-term future.

Do Contributions Create a Tax Deduction?

At the federal level, neither option generally provides a deduction for simply making a contribution.

Contributions to 529 plans are not federally deductible, although some states offer their own deductions, credits, or other incentives for qualifying contributions.

Trump Account contributions likewise do not provide a federal income tax deduction to individuals making the contribution. There are, however, separate rules allowing qualifying employer contributions of up to $2,500 annually to be excluded from an employee’s gross income, with those contributions generally counting toward the $5,000 annual limit.

So, Which One Should Families Choose?

It depends on what you are trying to accomplish.

If your priority is helping pay for college or other qualified educational costs, a 529 plan continues to offer meaningful tax advantages and flexibility.

If the goal is to give a child an early start on retirement savings and long-term investing, a Trump Account introduces a new opportunity, particularly for children eligible for the $1,000 federal contribution.

But families do not necessarily have to choose.

A child can have both a Trump Account and a 529 plan. For some families, using the two together could make sense: one pool of savings dedicated primarily to education and another designed to remain invested for the child’s longer-term financial future.

The right balance will depend on your family’s goals, available resources, anticipated education costs, and broader financial plan.

Start With the Goal, Not the Account

Whenever a new savings vehicle becomes available, it can be tempting to focus first on contribution limits, tax treatment, and investment options. Those details matter, but they are only part of the conversation.

Rather than starting with the account, start with your family’s goals for the money.At KEB, we can help families consider how Trump Accounts, 529 plans, and other savings strategies may fit together as part of a broader tax and financial plan. If you are wondering whether one or both accounts make sense for your family, reach out to KEB to start the conversation.

This article is intended for general informational purposes only and is not a substitute for individualized tax, legal, or investment advice. Rules surrounding Trump Accounts, 529 plans, contribution limits, distributions, and tax treatment may change over time and can vary based on individual circumstances and state law. Consult with your tax and financial advisors before making decisions based on this information.