Trump Accounts vs. 529 plans: Should parents open one or both for their child?
Editorial staff, J.P. Morgan Wealth Management
- Trump Accounts are tax-advantaged investment accounts which can be opened for children under age 18 with a Social Security number that allow contributions up to $5,000 per year during the growth period, and tax-deferred savings for the life of the account.
- Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a Social Security number may also receive a one-time $1,000 government deposit to their Trump Account.
- Comparatively, 529 plans are state-sponsored education savings accounts that allow tax-free withdrawals for qualified education expenses.
- Families may benefit from using a 529 plan for education-focused expenses and a Trump Account for broader long-term investing goals.
Saving for your children’s future often means balancing competing priorities, like meeting your daily financial obligations, saving for emergencies and your future, and planning for your kids’ potential education costs. Fortunately, families have options available to help save for these goals.
Trump Accounts are tax-advantaged investment accounts intended to support long-term savings by helping kids get an early start. Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a Social Security number may receive a one-time $1,000 government “seed” deposit, and additional contributions of up to $5,000 per year (indexed after 2027) are allowed through the end of the growth period (defined as ending December 31 of the year before the child turns 18), which compound over time. After the growth period, the account transitions to act as a traditional IRA (with a few differences). Meanwhile, 529 plans have helped families save for education expenses for decades and remain one of the most widely used college savings vehicles.
Understanding how Trump Accounts and 529 plans work can help families decide whether one or both accounts can help them reach their child’s financial goals.
How do Trump Accounts work?
Trump Accounts are tax-advantaged investment accounts for children under age 18 who have a Social Security number. These accounts were created as part of the One Big Beautiful Bill Act, which passed in July 2025. There is a limit of one Trump Account per child.
Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a Social Security number are eligible for a one-time $1,000 government deposit to their Trump Account. In addition, qualifying children may also receive charitable contributions from philanthropic donors or foundations, such as from the Michael & Susan Dell Foundation. Whether or not children qualify for either of these benefits, parents, family and other individuals can still contribute up to $5,000 per year (indexed after 2027) to build the account during the child’s growth period. Employers may also contribute, as described below. The Treasury’s $1,000 seed money and “qualified general contributions” do not count toward the $5,000 annual cap.
A parent, legal guardian, grandparent or adult sibling may be able to establish and control the account until the end of the growth period, at which point the child may be able to take control of the Trump Account. Trustee-to-trustee transfers (“rollovers”) are allowed during the growth period when they are made to another Trump Account for the same beneficiary. The rollover must be a full transfer – partial transfers are not permitted. The trustee-to-trustee transfer is a nontaxable event.
Employer and other contributions
Employers may contribute up to $2,500 (indexed after 2027) annually per employee (not per Trump Account). Any contributions from employers count toward the $5,000 yearly cap per account. For example, if your employer contributes the maximum $2,500 and you have five children, each with their own Trump Account, the contribution could be split evenly at $500 per account, still leaving room for you to contribute up to $4,500 to each child's account before reaching the $5,000 annual maximum. Importantly, an employer’s contribution is not considered income to either the employee or the dependent.
Contributions from parents, family and other individuals can be made with after-tax dollars during the account’s growth period. Once the growth period ends, the account generally follows traditional IRA rules, meaning that contributions can only be made if the account owner has earned income and complies with all other applicable IRA contribution requirements.
Investments and tax rules
During the growth period, the money in a Trump Account must be invested in broad U.S. equity index funds, like mutual funds or exchange-traded funds (ETFs). There can be no leverage, and annual fees and expenses are capped at 0.1%. Subject to limited exceptions for cash, no other investments are permitted, including sector-specific funds. Any earnings in the account are tax-deferred, and withdrawals are prohibited during the growth period unless they are due to the beneficiary’s death or a return of excess contributions. After the growth period, the account is generally subject to traditional IRA rules regarding withdrawals and taxation, including the potential for an early withdrawal tax unless an exception applies.
Contributions from the federal government, qualified general contributions and employer contributions do not create basis in the account and are taxable at withdrawal. Contributions from parents, family and other individuals create basis in the account, meaning they are not taxable at withdrawal, but any account growth will be taxable at withdrawal.
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How do 529 plans work?
Also tax-advantaged investment accounts, 529 plans are specifically designed to help families save for education expenses. A parent, grandparent or other adult can open an account for a child and contribute funds that are invested and allowed to grow over time. Contributions are made with after-tax dollars, but earnings grow tax-deferred and withdrawals are tax-free when used for qualified education expenses.
These plans are commonly used to pay for college costs such as tuition, fees, housing, meal plans and books. However, their flexibility has recently expanded thanks to the One Big Beautiful Bill Act. The funds can also be used for certain K-12 tuition expenses, registered apprenticeship programs, accredited vocational schools and limited student loan repayments. If the original beneficiary’s plans change, the account owner can typically transfer the funds to another eligible family member without any tax consequences.
Anyone can contribute to a 529 plan, and while there are no federal annual contribution limits, each state has different lifetime maximum limits. Many states also offer tax incentives or deductions for residents who contribute to their own state’s plan.
The account owner maintains control of the funds, including how they’re invested and when withdrawals are taken. If funds aren’t used for qualified education expenses, any earnings withdrawn may be subject to income taxes and a penalty. However, newer rules allow certain unused balances to be rolled into a Roth IRA for the beneficiary, within specific limits.
Trump Accounts vs. 529 plans
If you’re torn over whether you should open a Trump Account or a 529 plan, you don’t necessarily have to choose. Because these accounts serve different purposes, families can consider using both. A 529 plan can help you manage education costs with tax-free withdrawals, while a Trump Account may provide an additional investment vehicle for long-term wealth building.
Comparing Trump Accounts and 529 plans
Trump Account | 529 Plan |
|---|---|
Who can open | |
Parent, guardian or other authorized individual | Parent, guardian or other adult |
Initial deposit | |
$1,000 federal seed for babies born between 2025 and 2028 who are U.S. citizens with a Social Security number; $250 Dell Foundation charitable gift for eligible children 10 or younger born prior to 2025; no minimum required for additional deposits | Varies by state; often $0 or parent-chosen amount; no minimum required |
Who can contribute | |
During growth period, parents, family, other individuals, employers, charities, government | Anyone |
Annual contribution limit | |
During growth period, $5,000 (excludes government seed, Dell Foundation charitable gift and other “qualified general contributions;” includes employer contributions) | No annual limit; most states limit total contributions |
Tax benefits | |
Grows tax-deferred; taxed as ordinary income on withdrawal; potentially subject to early withdrawal tax (expect complexities around tracking pre-tax/post-tax contributions and the implications); employer contributions not deemed income to employee | Grows tax-deferred; withdrawals tax-free if used for education, earnings otherwise taxed as ordinary income plus a 10% penalty |
Who controls | |
Authorized individual (generally parent or guardian) until end of growth period at which time the beneficiary may be able to take control of the account | Account owner |
When funds can be used | |
During growth period, distributions are restricted; after growth period, subject to traditional IRA withdrawal rules (generally, anytime, for any reason) | Anytime for qualified educational expenses; nonqualified withdrawals subject to income tax and 10% penalty on earnings |
Penalty for early withdrawal | |
Yes, subject to early withdrawal tax unless an exception applies | Yes, if used for noneducational expenses |
How financial aid is impacted by Trump Accounts and 529 plans
Trump Accounts are new for 2026, so it’s not clear yet whether the money in the account can affect state tax benefits, college financial aid eligibility or other government programs. Families should talk to a tax or financial professional to understand how a Trump Account may impact their unique situation.
529 plans can impact financial aid for your child. Because 529 plans are counted as either an asset or income on the Free Application for Federal Student Aid (FAFSA), they can impact how much financial aid your child qualifies for. With some advance planning, the impact can be minimized.
One way to help minimize the impact of a 529 plan on financial aid is to designate a parent as the plan owner. The 529 plan will still need to be listed on the FAFSA, but a parent’s assets have less of an impact than a student’s assets (parents are expected to contribute a smaller portion). Most states allow you to change the owner on the account from the child to the parent, too, if it’s already in their name.
Steps to open a Trump Account
There is a limit of one Trump Account per child. If you’re ready to open one for a child, you can do so using IRS Form 4547Opens overlay or the online portal at trumpaccounts.gov/form. According to the IRS, Form 4547 may be used at any time, including when filing your 2025 (or future) income tax return. The election to open an account must be made before January 1 of the year in which your child turns 18. Accounts will become available and funded starting July 2026.
Since a child may only have one Trump Account, it is important to determine who will open and be responsible for the account during the growth period. Parents, legal guardians, grandparents or adult siblings may be able to establish the account for any child under age 18 with a Social Security number.
Finally, the account should be monitored by the authorized individual who set up the account, with involvement of the child as they get older to ensure it aligns with the child’s long-term goals.
Though Trump Accounts will initially be held with the U.S. Treasury Department’s designated trustee, you may be able to transfer the full balance to your preferred financial institution at a later date through a trustee-to-trustee transfer.
Steps to open a 529 plan
You can open a 529 plan for your child by following some general steps.
First, compare available plans. Review state-sponsored and national options, paying attention to fees, investment choices and potential state tax benefits.
Next, choose an account owner and beneficiary. Determine who will control the account and identify the child who will receive the funds.
Then, complete the application. Open the account online or through a financial provider by submitting personal and beneficiary information.
After that, select an investment portfolio. Choose between age-based allocations or static investment portfolios that match your time horizon and risk tolerance.
Finally, it’s time to make contributions. Fund the account with a lump sum or establish recurring deposits.
Lastly, review the account periodically. Reassess your investment choices and contribution levels over time as education goals and timelines change.
The bottom line
Trump Accounts and 529 plans are both investment vehicles that can help you secure a bright financial future for your children. While 529 plans are geared toward saving for education, Trump Accounts can help young people establish an early foundation for building long-term wealth. If you’re not sure which account is right for your child, consider working with J.P. Morgan financial professional to help make the most informed decision.
Frequently asked questions about Trump Accounts and 529 plans
You have several options available if your child doesn’t use their 529 plan for college. You can change the beneficiary to another eligible family member, use the funds for other qualified education expenses or potentially roll over unused funds into a Roth IRA (up to a certain amount). Nonqualified withdrawals are still allowed but typically trigger income taxes and penalties on earnings.
No, Trump Accounts are investment accounts, so they are not insured by the Federal Deposit Insurance Corporation (FDIC).
Yes, there’s no rule preventing families from using both to save for their child’s future. Because the accounts serve different objectives, many households may view them as complementary tools within a diversified savings strategy.
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Editorial staff, J.P. Morgan Wealth Management
