Parents with children under 18 can now enroll in a new type of tax-advantaged savings account, known as a Trump Account, when they file their 2025 tax returns. Experts say you should sign up for an account, but don’t wait until July to start contributing if you want to save for your child’s future.
That’s because Trump’s account isn’t the only way to save for your children’s futures, especially for major expenses like college, said Alex Kanellopoulos, a certified financial planner and investment director at Vista Capital Partners.
“Free money,” Kanellopoulos says. For children born between 2025 and 2028, Trump’s account includes a $1,000 federal deposit for parents who opt in, and children born before 2025 may be eligible for a $250 subsidy funded by a $6.25 billion personal pledge from billionaires Michael and Susan Dell.
But if you plan on paying for your child’s education in the future, Kanellopoulos says you should start saving now with a 529 college savings plan.
“The sooner you start saving, the better,” Kanellopoulos says. “We already know how expensive college tuition is. If you believe your child will go to college in the future, I don’t expect these costs to go down.”
529 Anti-Trump Account
Mr. Trump’s account and his 529 plan are both tax-advantaged vehicles designed for his children’s futures, but they essentially serve different financial purposes over different time periods, Kanellopoulos said.
A 529 plan is a state-sponsored savings tool that allows you to grow and withdraw money tax-free for qualified education expenses. In contrast, Trump Accounts are essentially retirement savings vehicles for newborns designed to build long-term wealth, Kanellopoulos says.
Although there are some non-penalty exceptions for qualifying events, the Trump account will eventually convert to a traditional individual retirement account and will be subject to traditional IRA withdrawal rules once the beneficiary turns 18.
Here we take a closer look at the differences between these accounts.
“There’s no reason to delay 529 financing,” Kanellopoulos said. If you have the means, you can fund both once the Trump account becomes available, but if you know you want to save for an education fund, you should start at $529, he said.
529s funds can be rolled over to retirement.
Ajay Kais, CFP and principal at KAI Advisors in Princeton Junction, New Jersey, says it may be easier to fund a 529 before opening a Trump account, even if you want to protect your children’s retirement funds.
If the 529 account has been open for at least 15 years, up to $35,000 of unused 529 funds can be transferred to a Roth IRA in the beneficiary’s name over the lifetime of the beneficiary. These transfers are subject to Roth IRA annual contribution limits and the beneficiary must have income.
Once you enter a Roth IRA, your funds grow tax-free as long as the account is open for at least five years, and withdrawals after age 59 1/2 are also tax-free. However, contributions can be withdrawn at any time without tax or penalties.
Beneficiaries of Trump accounts have the option to convert funds to a Roth IRA after the account becomes a traditional IRA. But because these accounts can include a mix of after-tax parental gifts and pre-tax federal grants and employer contributions, detailed record-keeping is essential and conversion can be cumbersome, Kais says.
“If your goal is to fund your children’s education and retirement, a 529 plan is, in my opinion, a more beneficial option,” Kais says.
If you qualify, open a Trump account for “free funds.” But if you’re looking for simplicity, fund a 529 first, Kais says. After all, the sooner you start, the better.
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