Trump Accounts vs. 529 Plans: Which Should You Choose?

What is a Trump Account?

A Trump Account is a tax-deferred investment account for children under 18, structured similarly to a traditional IRA. The accounts began accepting contributions July 4, 2026, and you have three ways to open a Trump Account:

• Electronically (recommended): Submit Form 4547 through the official online portal at trumpaccounts.gov. The IRS describes this as the fastest, safest, and easiest method.
• With your tax return: Include Form 4547 with your current-year e-filed Form 1040. This option became available starting with 2025 returns.
• By mail: File a paper Form 4547 separately — the slowest option and generally not recommended.

Parents, grandparents, other family members, and friends can all contribute up to an aggregate $5,000 per year combined. Employers can contribute up to $2,500 per employee (not per employee’s child) and the contributions must not exceed the $5,000 per year overall contribution limit. Children born between 2025 and 2028 may also qualify for a one-time $1,000 contribution from the federal government — a meaningful head start that doesn’t count toward the annual limit.

Importantly, unlike a traditional IRA, the child doesn’t need earned income to qualify for contributions. The contributions are not tax deductible in most cases and distributions are severely limited.

During the growth period, funds in a Trump Account can be invested only in eligible investments — specifically, those that track an index of primarily American companies, carry no leverage, and have annual expenses of no more than 0.1%.¹ When the child turns 18, the growth period ends, and the account begins following all the rules of a traditional IRA. The young adult may then roll the account over to an IRA or another eligible retirement plan, with ordinary income taxes applying to future distributions.

What is a 529 plan?

A 529 plan is a state-sponsored education savings account designed for qualified education expenses. Growth and withdrawals are tax-free when used for eligible costs, which include tuition, fees, books, and room and board at colleges, universities, and trade or vocational schools.³

The One Big Beautiful Bill Act, signed into law in July 2025, expanded what 529 funds can cover. Starting in 2026, the annual K-12 withdrawal limit doubled to $20,000 per student, and qualified expenses now include tutoring, standardized test fees, educational therapies, and dual-enrollment tuition. 529 funds can also pay for postsecondary credentialing programs, such as trade certifications and professional licenses. In addition, under the SECURE Act, up to $10,000 lifetime may be used to repay a beneficiary’s qualified student loans using a 529 account.

Many states offer tax deductions or credits for 529 contributions. Contribution limits are significantly higher than Trump Accounts — often exceeding $300,000 per beneficiary depending on the state. Additionally, under SECURE 2.0, you can roll over up to $35,000 in unused 529 funds to a Roth IRA for the beneficiary, subject to certain conditions.

Trump Account vs. 529: Key differences

While both accounts help families save for children’s futures, they serve fundamentally different purposes. The Trump Account vs. 529 comparison comes down to five key areas:

1. Tax treatment. A 529 plan offers tax-deferred growth and tax-free withdrawals for qualified education expenses. A Trump Account offers tax-deferred growth, but earnings are taxed upon withdrawal as ordinary income — similar to a traditional IRA.
2. Contribution limits. Trump Accounts cap contributions at $5,000 per year (inflated). 529 plans have much higher aggregate contribution limits, often exceeding $300,000 per beneficiary, with no annual contribution cap.
3. Investment options. Trump Accounts are limited to index funds tracking U.S. stock market indexes. 529 plans offer a range of professionally managed portfolios, including age-based options that automatically become more conservative as college approaches.
4. Withdrawal flexibility. 529 funds can go toward qualified education expenses, including K-12 costs, at any time. (Many states do not conform to the federal rules, and withdrawals for K-12 expenses may trigger state income tax or recapture.) 529 funds can go toward nonqualified expenses subject to ordinary income tax on the earnings and a 10% penalty. Trump Account funds cannot be withdrawn before age 18.
5. Financial aid impact. Parent- and student-owned 529 plans are treated as parent assets on the Free Application for Federal Student Aid (FAFSA^®, resulting in a more favorable assessment than for student-owned assets, such as Uniform Transfers to Minors Act (UTMA) accounts, Uniform Gifts to Minors Act (UGMA) accounts, or child savings accounts. Non-parent-owned 529 plans are not counted as assets on the FAFSA^® under current rules. Trump accounts are owned by the child and will likely be assessed at 20%, the same rate as an UTMA or UGMA account.

Should you use both?

You don’t have to choose between a Trump Account and a 529 plan — and many families benefit from using both. A 529 plan is purpose-built for education savings, offering tax-free withdrawals for qualified expenses and greater investment flexibility. A Trump Account focuses on long-term, tax-deferred wealth building, with the added benefit of the $1,000 government seed gift for eligible children.

A practical approach: If education is your primary goal, start with a 529 plan. If you’re focused on long-term wealth building, a Trump Account may fit your needs better — especially if your child qualifies for the $1,000 seed contribution. If you’re unsure about college, consider funding a 529 to the level you’d need for education and putting additional savings in a Trump Account.

Making them work together

For families with established wealth, the Trump Account vs. 529 decision — or the choice to use both — should fit within your broader financial strategy. A financial professional can help you coordinate savings contributions with your overall cash flow and goals, determining how much to allocate to each account based on your family’s specific circumstances. If you live in a state that offers tax deductions or tax credits for 529 contributions, those savings c may be substantial, while Trump Account contributions, though not deductible, offer tax-deferred growth that can complement your other tax-advantaged strategies.

Grandparents can open and own a 529 plan for a grandchild, keeping control of the assets while potentially reducing their taxable estate — and a grandparent-owned 529 isn’t counted as an asset on the FAFSA®, which can benefit financial aid eligibility. On the investment side, coordinating both accounts within your overall strategy can help you maintain appropriate diversification because 529 plans offer portfolios tailored to your risk tolerance while Trump Accounts focus on U.S. stock index funds.

Both accounts can also play a role in transferring wealth to the next generation: 529 plans allow you to change beneficiaries and keep funds within the family, while Trump Accounts provide a structured way to help build long-term wealth your child can access in adulthood.

A practical approach

Where to start often comes down to your main goal, and the Trump Account vs. 529 decision doesn’t have to be either-or. If you’re saving for education, a 529 plan may be the right foundation. If you’re focused on long-term, tax-deferred growth, a Trump Account may fit better — and it’s worth considering if your child is eligible for the $1,000 government contribution. If you’re not sure how likely college is for your child, you might use a combination of the two.

Whatever path you choose, review your plan regularly as laws, guidance, and your family’s goals change. Contact your Mercer Advisors wealth advisor to talk through your goals, open the right accounts, and build a savings strategy that fits your family.