Two kids, four accounts, one question
My son was born inside the window for the $1,000 Treasury seed money, so this summer we opened his Trump Account, and one for his big sister too (she missed the seed money by a couple of years, but the account itself is open to her). Both kids already had 529s. That’s four accounts for two people who can’t tie their own shoes yet.
Since then, the question I hear most from other parents goes something like this: “Can’t I just use the Trump Account for college?”
You sure can. For most families, I just don’t think you should.
First, what a Trump Account actually is
The short version: it’s a retirement account with a kid’s name on it. The slightly longer version:
- Seed money: U.S. citizen kids born from 2025 through 2028 get a one-time $1,000 deposit from the Treasury.
- Contributions: Family can put in up to $5,000 a year (an employer can chip in up to $2,500 of that). Contributions opened on July 4, 2026, and they stop in the year your child turns 18.
- Investments: Low-cost U.S. stock index funds, with fees capped at 0.10%.
- Access: Nothing comes out before the year your child turns 18. After that, the account follows IRA rules.
(For a fuller look at how these accounts work, including how we’re using ours, see Trump Accounts: What Parents Should Know [LINK TO TRUMP ACCOUNTS ARTICLE].) That last point is the one that matters for college, so let’s walk through it.
Same $20,000 tuition bill, two very different outcomes
Say freshman year comes due and you pull $20,000 to pay it.
From the 529: Withdrawals for qualified costs (tuition, room and board, books) come out tax-free, and they don’t count as income on FAFSA. The 529 balance does count as a parent asset, but at no more than 5.64% of its value. That’s a small bite.
From the Trump Account: This is where it gets messy. The money you contributed yourself comes back tax-free, since you already paid tax on it. Everything else (the growth, the $1,000 seed, any employer money) comes out as ordinary income to your kid. The usual 10% early-withdrawal penalty is waived for qualified college costs. The income tax isn’t.
Then FAFSA gets its turn. That taxable withdrawal is now your student’s income, and student income is the most heavily weighted piece of the aid formula: up to 50% of it counts against aid, above a small allowance ($11,770 for the 2026–27 aid year). If your kid already uses up that allowance with a summer job, every extra dollar of taxable withdrawal can raise their Student Aid Index by up to 50 cents. And because FAFSA looks back two tax years, a withdrawal for freshman year can quietly shrink aid in junior year (yikes).
One more wrinkle. The Department of Education hasn’t said yet how Trump Account balances will be treated on FAFSA. Some expect them to be counted as a student asset, which is assessed at 20%, versus 5.64% for a parent-owned 529. We’ll know more once guidance comes out, but nothing about that possibility helps the Trump Account’s case as a college fund.
So which one wins for college?
For a typical family paying for a typical college, it’s the 529, and it isn’t close. Qualified withdrawals are tax-free, FAFSA treats it gently, you can use it whenever the bill arrives (no age gate), and some states even give you a tax deduction for contributing.
That’s not a knock on the Trump Account. It has a real advantage: you can fund it for a kid with no earned income, which you can’t do with a Roth IRA. It just has a different job, and that job is decades away.
How we’re using both at home
We’re funding both accounts for both kids, but each account has exactly one job. The 529s are for college. The Trump Accounts are a head start on retirement (yes, I’m planning my kids’ retirement before either of them can say the word).
The plan is to keep contributing until the year each of them turns 18, when contributions stop. After that, the account becomes an IRA, and in their early twenties, when their income (and their tax bracket) is likely as low as it’ll ever be, we’ll look at converting it to a Roth. They’d pay some tax on the conversion then, and potentially nothing on decades of growth after that.
The $1,000 from Treasury just gets my son’s account off the starting line. There’s no reason to leave free money on the table.
Where that leaves you
Which account makes sense for your family comes down to what you want the money to do. The 529 was designed around college costs, while the Trump Account works more like a long-term retirement account for your kid. How that shakes out for you will depend on your income, your state, how many kids you have, and what your tax picture looks like, and that’s where we can actually help.
These accounts are brand new, and the rules will keep getting filled in. If you’re trying to figure out which dollar goes where, you know where to find me.
Sources
• Trump Account rules (seed eligibility, limits, basis, taxation): Center for Retirement Research at Boston College, “Trump Accounts: A Primer for Parents”
• Launch date, investment rules, IRA conversion at 18, penalty exception for college costs: Charles Schwab, “What to Know About Trump Accounts”
• Student income protection allowance ($11,770), 50% student income assessment, 20% student asset rate: U.S. Department of Education, 2026–27 SAI and Pell Grant Eligibility Guide
• Parent asset assessment (up to 5.64%), retirement accounts excluded: KidToCollege, “How Savings Affect FAFSA Aid in 2026–27”
• No FAFSA guidance yet on Trump Account balances: Saving for College, “Trump Accounts Explained”