Summary
President Trump introduced "Trump Accounts" as a new way for parents to save money for their children's future, offering a $1,000 government addition for kids born between 2025 and 2028. These accounts allow savings to grow without taxes until withdrawal, beginning at age 18, similar to retirement accounts. People are comparing these to 529 plans, which are also used for education savings and offer tax-free withdrawals for educational expenses.
Key Facts
- Trump Accounts were created under the reconciliation bill called One Big Beautiful Bill Act.
- These accounts provide a $1,000 government contribution for eligible children born from 2025 to 2028.
- Parents can contribute up to $5,000 per year, and the funds grow tax-deferred.
- Withdrawals can begin when the child turns 18, with similar tax rules to retirement accounts.
- Investments are limited to certain types of funds, like mutual funds tracking U.S. equities.
- 529 plans allow tax-free growth and withdrawals for education expenses and have higher contribution limits.
- 529 plans offer state tax benefits in some areas, unlike Trump Accounts.
