529 plan or Trump account? The answer for newborns is both.

The recently enacted Reconciliation Bill, commonly referred to as the One Big Beautiful Bill Act, enables parents to open new savings vehicles for their children, known as “Trump accounts.” Parents, relatives and even employers can add up to $5,000 each year until the child turns 18. For American children born between 2025 and 2028, parents can also apply for their child to receive a one-time $1,000 contribution from the U.S. Treasury if they meet certain requirements.¹

A free $1,000 for newborns makes Trump accounts a no-brainer. The bigger question is whether to contribute more. For families with education goals, the best approach may be to invest in a more advantageous 529 plan while using the seed money from a Trump account for establishing an early start to saving for other future needs including the purchase of a home or retirement.

Key advantages of 529 plans when investing for education

Tax-free investing. While 529 plans grow free from taxes for qualified education expenses, investment earnings in Trump accounts are taxed when withdrawn – leaving families with less for loved ones.³

Greater flexibility. Unlike Trump accounts, 529 plans enable investors to:
▪ Transfer funds to other eligible family members
▪ Roll over up to $35,000 to a tax-free Roth IRA in the beneficiary’s name⁴
▪ Keep accounts open and growing for future generations

More investment choices. Trump accounts are limited to one fund tracking the performance of the U.S. stock market. In comparison, 529 plans offer a much wider range of professionally managed investments, including diversified portfolios that automatically become more conservative as college gets closer.

Higher contribution limits. Investing the maximum $5,000 into a Trump account each year is unlikely to cover rapidly rising education costs. Contributors to 529 plans can give up to $190,000 in one year if married, or $95,000 if single.⁵

K-12 expenses. Starting in 2026, 529 account owners can withdraw as much as $20,000 per child each year for K-12 education, up from $10,000. Qualified expenses will now include not only tuition, but also books, tutoring, test fees, online materials and more. Withdrawals from Trump accounts are not generally allowed before a child turns 18.

Final thoughts

• Parents can open Trump accounts for any child under age 18, but those born before 2025 won’t receive the $1,000 bonus from the U.S. government. In those cases, a 529 plan alone may make more sense for education investors.
• As a next step, talk to your financial professional about how 529 plans and Trump accounts might work together in your investment plan.

¹ Source: Internal Revenue Code section 6434, titled “Trump Accounts Contribution Pilot Program,” was created by H.R. 1, also known as the One Big Beautiful Bill Act (OBBB). Employers may contribute up to $2,500 per employee under the age of 18 or for the dependents of an employee.

² Source: J.P. Morgan Asset Management. The performance quoted assumes a diversified portfolio could hypothetically earn 7.25% return over the long term. It is not indicative of any specific investment and is not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown.

³ Earnings on federal non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as any applicable state and local income taxes. Please consult your tax professional about your particular situation.

⁴ Tax- and penalty-free rollovers are subject to certain requirements and limitations. State tax treatment of Roth IRA rollovers may vary by 529 plan. Please consult your financial or tax professional for more information.

⁵ Maximum gifts are $190,000 per beneficiary from married couples filing jointly and $95,000 from single tax filers. No additional gifts can be made to the same beneficiary over a five-year period. If the donor does not survive the five years, a portion of the gift is returned to the taxable estate.