Trump Account vs 529: How They Compare for Education Savings
Published July 7, 2026
Last Modified Date July 7, 2026
Families planning for their children's financial futures have more tools at their disposal than ever. Bright Start 529 has been a trusted way to save for higher education for more than 25 years, and a newer investment vehicle called Trump Accounts (also known as 530A accounts) has recently emerged as part of a federal initiative that includes a one-time $1,000 seed deposit for eligible children. While both are worth considering, they serve different purposes and come with different rules. Taking a closer look at Trump Accounts vs. 529 plans can help families determine which option, or combination of both, makes sense for their situation.
What Is a Trump Account?
A Trump Account is a new type of individual retirement account (IRA) for children, established under Section 530A of the Internal Revenue Code through 2025 federal legislation, and administered by the U.S. Treasury Department. Designed for families that wish to contribute early to their child's long-term savings goals, such as the child's future retirement, Trump Accounts are established by a parent when the child is a minor and transition to a traditional IRA when the child reaches adulthood.
Any child under 18 years of age with a valid Social Security number can have a Trump Account. Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a valid Social Security number, are also eligible for a one-time $1,000 federal seed deposit. This seed money is limited to that birth window and citizenship requirement and is not available to children born outside it. Families, friends, and employers can contribute up to $5,000 per year (inflation-adjusted) until the child turns 18 years old. Contributions from 501(c)(3) charitable organizations, foundations, and government entities, including the one-time $1,000 federal seed, are exempt and do not count toward the annual $5,000 limit. Investment options are restricted to broad U.S. equity index funds, with fees capped at 0.1%. First contributions, including the federal seed deposit, are expected to be made no earlier than July 4, 2026.
Contributions to Trump Accounts are made with after-tax dollars, and distributions are generally prohibited before the end of the year the child turns 17 years old. After that, traditional IRA rules apply, which means penalty-free withdrawals start at age 59½, though those withdrawals are still subject to ordinary income tax. Trump Accounts are not designed specifically for education, and a Trump Account for kids cannot be transferred to another child.
How a Bright Start 529 Plan Works
Bright Start 529 is Illinois' state-sponsored 529 college savings plan, administered by the Illinois State Treasurer as Trustee. Available since 2000, the plan has helped more than 345,700 students, with families redeeming more than $6.7 billion for qualified education expenses.1
A Bright Start 529 college savings plan offers triple tax advantages: tax-deferred growth, tax-free withdrawals2 for qualified education expenses, and a state income tax deduction up to $10,000 ($20,000 married filing jointly) for Illinois taxpayers.3 Anyone with an SSN or ITIN can open an account with any dollar amount, and the maximum account balance is $550,000.
Trump Account vs 529: A Side-by-Side Comparison
Looking at a 529 plan vs. a Trump Account side by side, the two accounts differ across nearly every meaningful feature: eligibility, contribution limits, how earnings are taxed, what funds can be used for, and when they can be accessed.
| Feature | Trump Account | 529 Plan |
|---|---|---|
| Legislative Background |
The program is codified under Section 530A. U.S. Department of the Treasury as the agency responsible for setting up and managing the accounts. |
Established by Congress under Section 529 of the Internal Revenue Code in 1996. Established and overseen by individual state agencies or state authorized boards. Day-to-day management and investment services are typically contracted out to experienced financial institutions. |
| Account Opening Process |
Accounts can be opened online in the coming months. Accounts can also be opened using IRS Form 4547e. Expected launch date: July 4, 2026 |
Visit plan website for complete details. |
| Account Type |
A type of traditional IRA (Individual Retirement Account) |
An education savings plan |
| Sponsored By |
Federal Government |
State Government |
| Primary Purpose |
General wealth building; transitions into a retirement account (IRA) at adulthood. |
Saving specifically for qualified education expenses (college, vocational, certified apprenticeship programs, and up to $10,000 for student loan repayment). |
| Who It's For |
Any child under 18 with a Social Security Number |
Any individual with a Social Security Number (SSN) or Individual Tax Identification Number (ITIN). (No age requirement in most cases) |
| Who Can Contribute |
Families, friends, and employers |
Families, friends, and employers |
| Who Owns Account |
Child when they turn 18 |
Account Owner |
| When Funds Can Be Accessed |
Generally available to the child at retirement, with limits on early withdrawals. |
Withdraw anytime for qualified education expenses; taxes and penalties for non-qualified use. Up to $35,000 of unused funds can be rolled into the beneficiary's Roth IRA, subject to limitations. |
| Beneficiary Flexibility |
Cannot be transferred to another child and rollovers are only allowed between Trump accounts for the same beneficiary. |
You can change the beneficiary at any time or transfer a portion of the investment to a different eligible beneficiary. Funds can be rolled into the beneficiary's Roth IRA up to $35,000 over time (limitations apply). |
| Annual Contribution Limit |
$5,000 (inflation-adjusted). Contributions from 501(c)(3) organizations, foundations, and government entities (like the $1,000 federal seed) are exempt and do not count toward the limit. |
There are no annual contribution limits, however there are state specific maximum account balances generally ranging from $235,000 to $600,000. In Illinois, the maximum account balance for Illinois Section 529 programs is $550,000. |
| Government Seed Money |
Yes — a one-time $1,000 pilot program contribution from the federal government for eligible newborns (born 2025-2028). Children age 10 or younger born before 2025 living in zip codes with median incomes below $150,000 are eligible for a $250 deposit (not just the $1,000 for 2025-2028 births). |
Some states offer small seed contributions, but there is no federal government contribution. In Illinois, Illinois First Steps provides a free, one-time $50 seed deposit for eligible Bright Start 529 accounts. |
| Tax Treatment of Contributions |
Non-deductible at the federal level (contributions made with after-tax dollars, creating basis) |
No federal deduction, but many states offer a state income tax deduction for contributions (contributions made with after-tax dollars). In Illinois, taxpayers may deduct up to $10,000 ($20,000 if married filing jointly) of contributions to Bright Start 529.3 |
| Tax on Growth |
Grows tax-deferred; taxes paid on withdrawal in retirement (traditional IRA rules apply after age 18) |
Grows tax-deferred and tax-free when used for qualified education expenses |
| Withdrawals During Childhood |
Generally prohibited during the growth period (until end of year child turns 17) |
Can be withdrawn at any time for qualified education expenses tax-free. In Illinois, state tax benefits apply only to qualified higher education expenses. |
| Withdrawals for Education |
Not specifically designed for education; after the growth period, standard IRA early withdrawal rules apply (penalty-free withdrawals at 59 ½; penalties may apply before age 59 ½). |
Tax-free and penalty-free for qualified education expenses |
| Investment Options |
Restricted — must track a broad U.S. equity index, no leverage, fees capped at 0.1% |
Flexible — wide range of investment options such as mutual funds, ETFs, age-based or enrollment year portfolios |
| Employer Contributions |
Yes — employers can contribute up to $2,500 per employee (indexed after 2027) tax-free to the employee's child's account. (The Treasury and the IRS still need to issue guidance on how employers will make contributions to employee-dependent accounts.) |
In Illinois, employers can claim a state tax credit for 25% of their matching contributions up to a maximum credit of $500 per employee per year. |
| Government/Nonprofit Contributions |
Yes — $1,000 for those born between 2025 and 2028 can receive contributions through the Treasury Department (do not count toward the $5,000 limit). |
In Illinois, the Illinois First Steps program provides a free, one-time $50 seed deposit for Illinois parents or legal guardians when they open a Bright Start 529 account for a child born or adopted on or after January 1, 2023. |
| What Happens at Adulthood |
Automatically becomes a standard traditional IRA at age 18 — funds are earmarked for retirement |
Account remains an education savings account; can be rolled over to a Roth IRA (limitations apply) or transferred to another eligible beneficiary |
| Rollover to ABLE Account |
Yes— the entire balance can be rolled over to an ABLE account in the year the child turns 17 (for individuals with disabilities). At this time, funds from Trump accounts cannot be rolled over or transferred into a 529 plan. |
Limited rollover options; rollovers to ABLE accounts are permitted but subject to ABLE contribution limits. |
| Account Control |
Managed by a "responsible party" (parent/guardian) during childhood; child takes over at adulthood |
Owned by the account owner (typically a parent), who retains control even after the beneficiary reaches adulthood |
| SSN Requirement |
Child must have a valid SSN before the account is opened |
Child must have a valid SSN before the account is opened |
| Number of Accounts |
Only one funded Trump Account allowed per child at any time |
A child can be the beneficiary of multiple 529 plans |
| Citizenship Requirement |
The $1,000 pilot contribution requires U.S. citizenship; general account opening does not specify citizenship explicitly. |
Generally, any U.S. citizen or resident alien with a valid Social Security number or taxpayer identification number who is at least 18 years of age. |
| Financial Aid Impact |
Using a Trump Account or IRA for education can reduce financial aid eligibility, since withdrawals count as student income on the Free Application for Federal Student Aid (FAFSA). Student-owned assets are assessed at up to 20% in the Student Aid Index (SAI) which determines the student's financial need.4 |
Parent-owned assets (like a 529 plan) are assessed at about 5.6% in the Student Aid Index (SAI) calculation on the FAFSA, compared with up to 20% for student-owned assets (such as a Trump Account). The Student Aid Index (SAI) determines the student's financial need.4 |
Why a 529 Plan Can Be a Smart Choice for Education Savings
For families whose primary goal is saving for a child's education, a 529 plan can be a smart way to save because it was built for that specific purpose.
Tax-Deferred Growth and Tax-Free Withdrawals for Qualified Education Expenses2
Earnings in a 529 plan grow tax-deferred and are tax-free when used for qualified education expenses. With a Trump Account, withdrawals are taxed as ordinary income under traditional IRA rules.
Illinois State Tax Deduction
Illinois taxpayers may deduct contributions to Bright Start 529 from their Illinois state taxable income, up to $10,000 per year, or $20,000 for married couples filing jointly.3 Trump Accounts offer no equivalent state tax benefit. Learn more about the Illinois state tax deduction. Consider speaking with a tax or legal professional for advice specific to your situation.
Higher Contribution Limits
For the tax year 2026, there's no federal gift tax on contributions made up to $19,000 per year for single filers, or $38,000 for married couples. Families can also accelerate gifting with a lump-sum gift of $95,000 for single filers or $190,000 for married couples and prorate the gift over five years per the federal gift tax exclusion. By comparison, Trump Accounts cap annual contributions at $5,000.
Flexibility If Plans Change
Account owners can change the beneficiary to another eligible family member at any time, and unused funds can be rolled into the beneficiary's Roth IRA up to $35,000 over the beneficiary's lifetime, subject to conditions. Account owners and beneficiaries should consult with a qualified tax professional before rolling over funds from their 529 plan to a Roth IRA.5
Different Financial Aid Impact
Who owns the account also affects financial aid. If a student uses a Trump Account or a traditional IRA to pay for education, the withdrawal counts as student income on the Free Application for Federal Student Aid (FAFSA) and can reduce financial aid eligibility. Trump Accounts are owned by the student, and any withdrawals are considered student-owned assets which are generally assessed at up to 20% in the Student Aid Index (SAI) calculation. By contrast, parent-owned assets like a 529 plan are generally assessed at about 5.6% in the SAI calculation.
Can Families Use Both a Trump Account and a 529 Plan?
Yes. The two accounts aren't mutually exclusive, and depending on a family's goals, opening both may make sense. While any child under 18 with a valid Social Security number can have a Trump Account, the one-time $1,000 federal seed deposit is reserved for children born between January 1, 2025, and December 31, 2028. Families with children in that birth window often have an added reason to open a Trump Account because the seed money is only available during the pilot period. Families with older children can still open a Trump Account, but won't receive the federal seed money. In either case, eligibility for the seed is independent of whether the family also has a Bright Start 529 account.
Illinois families can also take advantage of the free seed deposit from Illinois First Steps. Every baby born or adopted on or after January 1, 2023, to Illinois resident parents or legal guardians may be eligible for a free one-time $50 seed deposit to a Bright Start 529 account. As of May 29, 2026, more than 36,000 Illinois families have claimed the $50 seed deposit from Illinois First Steps since the program's inception.6
One important limitation: funds cannot be transferred or rolled over between Trump Accounts and 529 plans. Each account must be funded and used separately. When weighing a Trump Account vs. a 529 account, families may want to consider both accounts as complementary tools: Bright Start 529 for education savings, and a Trump Account for broader long-term savings that follow the child into adulthood.
Note: The proposed IRS regulations as of March 2026 for Trump Accounts are subject to change before being finalized. This material is for informational or educational purposes only and is not fiduciary investment advice or a securities, investment strategy, or insurance product recommendation. This material does not consider individual objectives or circumstances, which should be the basis of investment decisions. TIAA Companies does not provide legal or tax advice. Consult your legal/tax advisor regarding your specific circumstances.
