Could Trump Accounts be the Best College Savings Option?

President Donald Trump’s One Big Beautiful Bill introduced a new savings option for families called Trump Accounts. The program is designed to help parents jumpstart their children’s long-term financial future from an early age.

Eligible children can have an account opened on their behalf, and those born during the program’s designated window will receive a $1,000 government-funded seed deposit. Families can then add their own savings over time.

Here’s a quick look at how Trump Accounts work and how they compare to more familiar options like 529 plans for college savings.

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Trump Accounts: How they work

The goal of these accounts is to invest in a broad U.S. stock-market index once opened by the Treasury Department. Unlike 529 plans or Coverdell Education Savings Accounts, Trump Accounts do not allow families to choose their investments.

Families can contribute up to $5,000 in post-tax dollars each year to build the fund, and contributions can continue until the child turns 18.

Under current IRS guidance, no withdrawals are permitted before the year the child turns 18, except in very limited circumstances such as death or disability. Once the beneficiary reaches 18, the account is generally treated like a traditional IRA, and withdrawals are subject to standard IRA tax rules. Meaning they may trigger income taxes and, in some cases, penalties.

Michael and Susan Dell pledge $6.25 billion donation

One big question is how these accounts will receive funding. A major boost came from Michael Dell, CEO of Dell Technologies, and his wife, Susan, who pledged $6.25 billion to support the launch of Trump Accounts. Their donation is expected to provide $250 per child for millions of eligible children, helping jumpstart the program’s early rollout.

The Dell pledge is intended to supplement the federal government’s own seed deposits for qualifying newborns and ensure more families can begin saving once the program opens.

According to current IRS guidance, the earliest contributions to Trump Accounts can begin is July 4, 2026. While the government has not finalized the exact date parents can begin registering for accounts, this is the first date when accounts can officially receive funding.

Trump Account: Tax implications

When opening a savings account for a child or grandchild, tax treatment is a major factor. One limitation of Trump Accounts is that contributions are not tax-deductible, similar to 529 plans at the federal level, though many states do offer tax incentives for 529 contributions.

Once the beneficiary turns 18 and withdrawals become allowed, Trump Accounts are treated like traditional IRAs for tax purposes. That means any taxable portion of a withdrawal, typically the investment earnings, is taxed as ordinary income. Withdrawals taken before age 59½ may also face a 10% early-distribution penalty, unless an IRA exception applies.

States may also tax Trump Account distributions, depending on local rules. And unlike 529 plans, which allow tax free withdrawals for qualified education expenses, Trump Accounts do not offer tax free treatment. Earnings withdrawn from a Trump Account are taxed as ordinary income, even when used for qualified purposes.

However, because the account is treated like a traditional IRA once the beneficiary turns 18, certain withdrawals, such as those for higher education or a first time home purchase, may qualify for penalty free treatment, although they remain taxable.

Trump Accounts vs other college savings

A college student looks into the distance while standing outside a classroom and holding books.

One of the best ways to determine if a Trump Account would be the right approach for your family is to compare it to other options:

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Comparing college savings options
Accounts	Max annual contribution	Federal tax credit eligible for contributions	State tax credit eligible for contributions	Taxes on withdrawals	Choose your investments
Trump Accounts	$5,000	No	No	Ordinary income tax; penalty may apply (treated like a traditional IRA)	No
529 plans	$19,000 for single filers, $38,000 for married (gift-tax rules)	No	Yes (varies by state)	Federal and often state tax-exempt for qualified expenses	Yes
Coverdell Education Savings Account	$2,000	No	Yes, some states offer tax credits	Federal and often state tax-exempt for qualified expenses	Yes

As you can see, Trump Accounts come with strings attached. Families cannot choose how the money is invested, and withdrawals are taxed at both the federal level and, in many cases, the state level.

Trump Accounts: Pros and cons

Here are some pros and cons to consider:

Pros:

$1,000 government seed deposit for eligible newborns
Families can contribute up to $5,000 annually until the child turns 18
Certain withdrawals, such as those for higher education or a first time home purchase, may qualify for penalty free treatment (although they remain taxable)
The Milken Institute estimates that $1,000 invested in a broad based U.S. equity index fund could grow significantly over 20 years, based on historical returns

Cons:

You cannot choose your investment options
Withdrawals are taxed at the federal level and may also be taxed by your state
Many withdrawals may trigger a 10% early distribution penalty unless they qualify for an IRA exception
The rules are complex and may be difficult for families to navigate
This program could cost more than $3 billion annually, per Time

The bottom line on Trump Accounts

President Donald Trump's One Big Beautiful Bill includes a provision for helping families kickstart their babies' financial future through Trump Accounts.

Is it the best option available? No. 529 plans offer more flexibility in investment options; you'll have higher annual contribution limits and eligible withdrawals are exempt from federal taxes. That said, free money is free money, and if invested well, a Trump Account could help fund your child's future educational plans.

Sean is a veteran personal finance writer, with over 10 years of experience. He's written finance guides on insurance, savings, travel and more for CNET, Bankrate and GOBankingRates.