529s, Roth IRAs, or Trump Accounts? Considerations for Saving for Kids in 2026

Among the many new provisions in the “One Big Beautiful Bill” Act, we have a new account for kids dubbed “Trump Accounts”. As a financial planner, I help clients navigate dozens of account types, so when I learned about Trump Accounts, I knew clients would have questions. Here’s what we know so far about these accounts and how they might fit into a family’s finances.

Starting in 2026, Trump Accounts will be available for any U.S. citizen under the age of 18. The accounts will be set up by a parent or guardian, though it’s not yet known how or where exactly these accounts will be held. There’s no household income limit to opening these accounts.

Families can contribute up to $5,000 per year to the account until the child turns 18, with plans to adjust the limit with inflation. Of that $5,000, an employer may contribute up to $2,500 into an employee’s account or employee’s child’s account. The account may only be invested in “broad U.S. equity index funds that track the overall U.S. stock market” (per whitehouse.gov).

Children born between January 1, 2025 and December 31, 2028 will qualify for a one-time $1,000 contribution from the U.S. government. Recently, the Dell Foundation announced it will contribute $250 to accounts for children under the age of 10 and living in ZIP codes with median incomes below $150,000.

Once the child turns 18, the account will be treated like a traditional IRA, and withdrawal rules will follow traditional IRA rules, including 10% penalty tax for withdrawals prior to age 59 ½.

So, what do all of these accounts rules and processes mean for families?

Of course, as with all financial recommendations, it will depend on each family’s situation, but below are three examples of scenarios where a family might consider a Trump account alongside other investment options. As with many financial decisions, the answer will often boil down to everyone’s favorite topic – taxes.

Saving for college or higher education

Trump Account or 529s?

Contributions to a Trump account don’t seem to be tax-deductible for parents. The money grows tax-deferred, and at 18, it turns into a Traditional IRA, which can be used for qualified higher education expenses without the 10% early withdrawal penalty. Ordinary income tax rates will still apply to any withdrawals. This means the parents paid taxes on dollars going in, kids will pay taxes on dollars coming out. The $5,000 annual limit on contributions may also not be enough room for parents to meet their college savings goal.

In many states, parents receive (varying) tax deductions for 529 contributions. The money also grows tax-deferred, but the 529 wins out for this goal because withdrawals from a 529 account for a qualified education expense are tax free. With the IRS gifting limits and the 5-year superfunding rule, we have more room for contributions in 529s.

My answer: If the goal is to fund college expenses, 529s still win out.

Starting a nest egg for kids

Trump Account or non-qualified account, UTMA, or UGMA?

There are plenty of options for building a nest egg for kids for things like a home down payment or new “adulthood” expenses, and the taxes will vary depending on the type of account. However, when comparing a Trump Account and the IRA that it turns into at 18 to those other options, the Trump Account does not make the most sense if the goal is to spend the money before retirement. At their core, IRAs are designed to be used for retirement, and there are rules in place to dissuade the use of funds for other purposes. There are a few exceptions to the 10% early withdrawal penalty, like the education exception listed above, or a first-time homebuyer exception of  $10,000, but withdrawals from an IRA will still be subject to ordinary income tax.

My answer: If the intention is to build a nest egg of money for a child to use any time before they are 59 1/2, there are other, more tax-efficient accounts than a Trump account.

Kickstarting retirement savings

Trump Account or Guardian Roth IRA?

This scenario is where my opinions fall in the gray area. Ask any financial planner when the ideal time to start saving for retirement, and they’ll tell you “as soon as possible”. Trump accounts give parents another avenue to make that happen, and for some kids, the government is providing an extra boost. If these accounts are funded for a generation of kids, and they remain untouched, growing for 60+ years, the math looks great. These accounts alone likely won’t be the only answer for retirement savings, but any savings put away early will start a solid foundation.

My opinion starts to waiver a bit here when it comes to the taxation of money. Again, it does not look like parents will receive a tax deduction for the contributions, and when the child is in retirement and withdrawing the money, they will pay ordinary income tax on everything.  Taxes on money going in, taxes on money going out.

Retirement accounts for kids are not a new idea. Guardian or custodial Roth IRAs have been around for a while. If a child is earning income, whether through helping out at the family business, babysitting for the next-door neighbors, or life guarding at the pool during the summer, they can contribute to a Roth IRA. Contributions are not tax deductible, but the key here is all withdrawals are tax-free after 59 ½

My answer: Any retirement saving is good saving, but Guardian Roth IRAs have more favorable tax treatment for withdrawals in retirement.

Final Thoughts

Are these Trump Accounts a positive addition to wealth-building strategies for the next generation? Sure. Especially with the $1,000 contribution from the government – “free” money is money. Starting any savings vehicle early allows for decades of compound growth.

Are these Trump accounts always going to be best option for wealth-building for the next generation? Probably not, especially considering the many other options with more favorable tax treatment for both the child and parents contributing.

Do I (a licensed financial advisor, not a political expert) think that these accounts will change the course of the future of kids in this country? No, especially considering the rising costs of living and increasing costs of higher education paired with the current administration’s efforts to reduce access to federal student loans and income-driven repayment programs. Giving parents one more place to save for their kids’ futures only helps when parents have the extra money to save.

As  parents consider their options for savings for kids, these Trump accounts will start to join in the conversation, especially for kids born in 2025 and the next three years. If you’re curious how these accounts might fit into your family’s financial plan, talk with your financial planner—or reach out to me if you want to learn more!

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