The New Trump Accounts: Compared to 529 Plans and Roth IRAs

August 13, 2025

The One Big Beautiful Bill Act (OBBBA) introduced a brand-new savings option for families: Trump Accounts. These accounts help parents, grandparents, and employers save for a child's future and have a special feature. Newborns born between 2025 and 2028 are eligible. These newborns will receive a one-time federal deposit of $1,000 immediately.

It’s an interesting idea — a government-funded jumpstart. However, it adds another choice to a crowded list of savings tools for kids. These tools include 529 plans, Roth IRAs, and Coverdell accounts.

The real question is: How do Trump Accounts compare to the tried-and-true options we already know? Let’s break it down.

1. What Exactly Is a Trump Account?

Trump Accounts are savings vehicles for children under age 18. Here’s what you need to know:

●     Who’s eligible for the $1,000 bonus: Newborns between 2025–2028.

●     Annual contribution limit: Up to $5,000 (after-tax dollars).

●     Additional contributions: Employers and charities can add up to $2,500 per account each year.

●     Investment options: Limited to low-cost U.S. equity funds (no sector-specific funds).

●     Growth & taxes: Funds grow tax-deferred, but all withdrawals — including the government deposit — are taxed as ordinary income. Withdrawals before age 59½ may face penalties unless they meet certain exceptions.

Key takeaway: These accounts offer a nice starting boost but have strict investment rules and don’t carry the same tax perks as other savings vehicles.

2. Trump Accounts vs. 529 Plans

If your main goal is saving for college (or other education expenses), 529 plans still shine in many areas.

Contribution power:

●     529 plan: In 2025, you can put in up to $19,000 for each child. Couples can contribute up to $38,000. You can also "front-load" up to $95,000 in one year for each child. Couples can front-load up to $190,000 without worrying about gift tax.

●     Trump Account: $5,000 annual cap plus the one-time $1,000 seed.

Investment flexibility:

●     529 plan: Age-based portfolios automatically adjust from stocks to bonds/cash as college approaches.

●     Trump Account: Must be in low-cost U.S. equity funds only — less flexibility to adjust risk over time.

Tax treatment:

●     529 plan: Withdrawals are tax-free for qualified education expenses.

●     Trump Account: Withdrawals are taxed as ordinary income and may face penalties if used early for non-qualified purposes.

Exrta perks of 529 plans under OBBA:

●     Broader use of funds, including K–12 tuition (up to $20,000 annually from 2026), tutoring, credential programs, and licensing exams.

●     Ability to roll up to $35,000 of unused funds into a Roth IRA for the beneficiary under certain conditions.

Bottom line: For most families, 529 plans remain the most versatile, tax-friendly education savings tool. Trump Accounts could be a side option — but not a replacement.

3. Trump Accounts vs. Roth IRAs

For children with earned income, a custodial Roth IRA can be one of the most powerful long-term wealth-building tools.

Why Roth IRAs stand out:

●     Contributions are made after-tax and grow tax-free.

●     Qualified withdrawals in retirement are completely tax-free.

●     In 2025, children earning under the $14,900 standard deduction likely owe no federal tax — meaning Roth contributions are effectively tax-free both going in and coming out.

Trump Account differences:

●     No earned income requirement (good for investing from birth).

●     Lower annual contribution cap than a Roth IRA ($5,000 vs. $7,000 in 2025).

●     Withdrawals taxed as ordinary income, unlike the Roth’s tax-free benefit.

Bottom line: If your child has earned income, a Roth IRA generally offers better long-term tax treatment and withdrawal flexibility. Trump Accounts are more about early accessibility and the $1,000 head start.

Where Trump Accounts Might Fit

Trump Accounts are best viewed as a supplement, not a primary strategy. They may appeal to:

●     High-income families who have already maxed out 529 and Roth IRA contributions.

●     Families with eligible newborns who want to take advantage of the $1,000 federal deposit.

●     Parents seeking employer or charitable contributions toward a child’s future.

Final Thought

While the "shiny new" aspect of Trump Accounts will attract attention, the best savings strategy depends on your goals. These goals may include funding education, building retirement savings, or both. For most families, 529 plans and Roth IRAs continue to offer stronger tax advantages and greater flexibility.

If you’d like help deciding how a Trump Account might fit into your family’s broader plan — or whether other strategies make more sense — we 're happy to help.

 Sources:

Taylor, Debra. “Trump Accounts vs. 529 Plans and Roth IRAs: What’s Best for Your Child?” Daily Oats, 11 August 2025, www.horsesmouth.com

Disclosure:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.