By Contributor,Juan Carlos Medina

Copyright forbes

Mother and daughter deciding where to save for different goals

The enhanced 529 plan and the newly introduced Trump Account are giving families more to think about when planning for education and beyond. I’ll walk you through what’s changed, the planning opportunities that exist, and how to decide which one or which combination might be best for you.

529 Plans: More Flexible Than Ever

Already a popular education savings vehicle, 529 plans have been upgraded with more flexibility and broader uses.

Key Changes

K–12 expenses doubled: Beginning in 2026 families can withdraw up to $20,000 per student annually for private tuition, books, tutoring, and other learning expenses.

Wider eligible expenses: Funds can now cover curriculum materials, testing fees, licensing, and certain therapies or instructional support.

Credentials & certifications: In addition to college, 529 funds can now pay for professional programs such as the CFP®, CISSP, AWS certifications, state-licensed trades (cosmetology, HVAC, massage therapy), and any credential recognized under the Workforce Innovation and Opportunity Act (WIOA).

Roth IRA rollover option: You can roll over up to $35,000 of unused 529 funds into the beneficiary’s Roth IRA (subject to normal Roth contribution limits).

Important Limitations:

The account must be at least 15 years old to use the Roth rollover, and contributions from the last five years can not be rolled over.

The $35,000 lifetime rollover cap is firm.

Non-qualified withdrawals are subject to taxes and a 10% penalty.

State rules may lag federal changes, verify with your plan.

Standard Roth IRA, and annual contribution limits apply.

Summary: The 529 account continues to be one of the most tax-efficient ways to save for education, now with added flexibility and options to reduce concerns of overfunding.

The Trump Account: A Starter IRA

The Trump Account was originally envisioned as a flexible savings vehicle for children, with education benefits attached. In its final form it is essentially an IRA account with a government funded head start, seeded at birth.

MORE FOR YOU

Key Features

$1,000 government funded contribution: Children born between Jan. 1, 2025, and Dec. 31, 2028, automatically receive this initial deposit.

Contributions: Parents, relatives, and friends, can contribute up to $5,000 per year per child. In addition, employers can contribute up to $2,500 per child, counting towards the same $5,000 per child limit.

Investments: Savings must remain in low-cost index funds until Age 18. After 18, additional investment options might become available.

Withdrawals: Savings cannot be touched until Age 18. After 18, savings are taxed like a traditional IRA. Early withdrawals (Before 59 ½) incur a 10% penalty unless used for qualified education, a first-home purchase (up to $10,000), or other standard IRA exceptions.

Important to note:

Education withdrawals are not tax-free (like the 529), however they are exempt from the 10% penalty.

Flexibility is limited until age 18.

Incentives could change with future legislation.

Final IRS guidance along with administration details are expected by July 2026.

Summary: The Trump account is a great way to jump start retirement savings for eligible children; however, it is not a primary education savings vehicle.

Planning considerations:

For parents with eligible children, opening a Trump Account to receive the $1,000 seed is a no brainer – take the free money. It can also be a smart move if an employer offers to deposit money as a workplace perk.

Beyond that, you want to prioritize your goals and consider other eligible accounts. For example, if your goal is to focus on education and maximize tax benefits then the 529 might be the next best place to go. However, if you are looking for the most tax efficient, and flexible way to help your child save for retirement, and you can demonstrate they have earned income, the custodial Roth IRA may be the next best place to go. If you have maxed out all other tax-advantaged ways to save for your child, then you may want to put extra money in a Trump Account.

Your Next Steps

Plan Ahead: Use a calculator to help plan for education expenses and other goals. Prioritize based on what’s most important to your family.

Consider opening or adding to a 529 before year end. The enhanced flexibility makes it hard to beat for pure education savings purposes, and if your state offers any deductions and credits, it’s a great way to free up additional cash for your goals.

Start a Trump Account (if eligible). If your child is born between 2025 and 2028, take the free $1,000 and let it grow.

Combine strategies. Fund the 529 for core education needs, then use the Trump Account for extra, long-term savings if you’ve maxed out other tax qualified accounts.

Stay informed. Keep an eye on future tax law changes and IRS guidance. Always verify these decisions with a qualified financial planning or tax professional.

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