Parents with children under age 18 can now begin registering for a new type of tax-advantaged savings account known as a Trump account when filing their 2025 tax returns. Register for the account, experts say, but don’t wait for contributions to begin in July if you want to save for your children’s futures.
That’s because Trump accounts aren’t the only way to save for a child’s future, especially for major expenses like college, says Alex Canellopoulos, a certified financial planner and director of investments at Vista Capital Partners.
Take the “free money,” Canellopoulos says: For children born between 2025 and 2028, the Trump accounts will include a $1,000 federal deposit for parents who opt in, and children born before 2025 may be eligible for a $250 grant funded by a private $6.25 billion pledge from billionaires Michael and Susan Dell.
But if you expect to pay for your child’s education in the future, Canellopoulos says to also start saving now with a 529 college savings plan.
“The earlier you can save, the better,” Canellopoulos says. “We know how expensive college is already. If you believe your kid will go to college in the future, I wouldn’t count on these expenses going down.”
529s versus Trump Accounts
Trump accounts and 529 plans are both tax-advantaged vehicles designed for a child’s future, but fundamentally, they serve different financial purposes with different time horizons, Canellopoulos says.
A 529 plan is a state-sponsored savings tool that offers tax-free growth and withdrawals for qualified education costs. In contrast, a Trump account is essentially a retirement savings vehicle for newborns designed to build long-term wealth, Canellopoulos says.
Though they will come with some penalty-free exceptions for qualified events, Trump Accounts will eventually convert into traditional individual retirement accounts and are subject to traditional IRA withdrawal rules once a beneficiary turns 18.
Here’s a closer look at the differences between these accounts.
“There is no reason to delay funding a 529,” Canellopoulos says. If you have the means, you can fund both once the Trump accounts become available, but if you know you want to save for education, start with a 529, he says.
529s funds can roll over into retirement
It may be easier to fund a 529 before a Trump account even if you do want to set aside money for your child’s retirement, says Ajay Kaisth, a CFP and principal at KAI Advisors in Princeton Junction, New Jersey.
Over a beneficiary’s lifetime, up to $35,000 in unused 529 funds can be transferred to a Roth IRA in their name, provided the 529 account has been open for at least 15 years. These transfers are subject to annual Roth IRA contribution limits and the beneficiary must have earned income.
Once in a Roth IRA, funds grow tax-free and withdrawals are tax-free after age 59½, as long as the account has been open for at least five years. Contributions, however, can generally be withdrawn tax and penalty-free at any time.
Trump account beneficiaries have the option to convert their funds into a Roth IRA after their account becomes a traditional IRA. However, because these accounts may mix post-tax parental gifts with pre-tax federal grants and employer contributions, detailed record-keeping is essential, and converting could be a hassle, Kaisth says.
“If the goal is to fund a child’s education and retirement, in my mind, a 529 plan becomes the more beneficial option,” Kaisth says.
Open a Trump account for the “free money” if you’re eligible, but if you’re looking for simplicity, fund the 529 first, Kaisth says. Ultimately, “the earlier you start whichever, the better it is.”
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