Open both accounts. That is the short answer, and this guide will explain exactly why. The Trump Account (officially the MAGA Account, codified as IRC Section 530A under the One Big Beautiful Bill Act) and the 529 Plan serve completely different purposes. One gives your child a government-funded head start on retirement savings with potential employer contributions. The other lets you fund education expenses with 100% tax-free growth. They are not competing products. They are complementary tools that belong in the same family financial plan.
I have been fielding questions about Trump Accounts since the One Big Beautiful Bill Act (OBBBA, Public Law 119-21) was signed on July 4, 2025. The most common question is whether parents should choose a Trump Account or a 529 Plan. The answer is almost always both, but understanding when each account has the advantage requires looking at the tax treatment, contribution limits, investment flexibility, FAFSA impact, and withdrawal rules side by side.
This guide provides that comparison with specific numbers for New Jersey families. Every IRC citation, OBBBA section reference, and NJ rule is current as of March 2026. For a deep dive into Trump Accounts alone, see my complete Trump Account guide. For retirement planning strategy, see my retirement planning services.
In this guide:
- What Is a Trump Account (Section 530A)?
- What Is a 529 Plan?
- Side-by-Side Comparison Table
- Tax Treatment: The Critical Difference
- Scenario Analysis: Three NJ Family Income Levels
- When the Trump Account Wins
- When the 529 Plan Wins
- NJ-Specific Considerations
- The "Open Both" Strategy
- FAQ
What Is a Trump Account (Section 530A)?
The Trump Account, formally known as the MAGA Account (Money Account for Growth and Advancement), was created by Sections 70601 through 70606 of the One Big Beautiful Bill Act (OBBBA, Public Law 119-21), signed July 4, 2025. It is codified as IRC Section 530A.
The account is a tax-advantaged savings vehicle for children under 18 with a valid Social Security Number. It functions as a custodial retirement account. Parents, grandparents, and employers can contribute up to $5,000 per year (indexed for inflation beginning in 2028). The government provides a $1,000 seed contribution for children born between 2025 and 2028. Contributions are not tax-deductible, but growth is tax-deferred. When the child reaches 18, the account converts to an individual retirement account under their control, and qualified distributions in retirement are taxed as ordinary income — similar to a traditional IRA.
Employers can contribute up to $2,500 per year under new IRC Section 128, excludable from the employee's gross income. This is functionally an employer match for a child's retirement account — a benefit that did not exist before the OBBBA.
The investment options are limited by statute to a single U.S. equity index fund with a management fee cap of 0.10%. The fund tracks a broad U.S. stock market index. There is no bond option, no international option, no age-based glide path. This is 100% U.S. equities for the entire life of the account.
What Is a 529 Plan?
The 529 Plan (formally a Qualified Tuition Program under IRC Section 529) has existed since 1996. It is designed for education savings. Any individual can open a 529 for any beneficiary — there are no age limits, no income limits, and no citizenship requirements beyond having a valid SSN or TIN.
Contributions are made with after-tax dollars (no federal deduction), but New Jersey offers a state income tax deduction of up to $10,000 per year for taxpayers with gross income of $200,000 or less. Growth is tax-deferred, and qualified distributions for education expenses are 100% tax-free at both the federal and state level. Qualified expenses include tuition, room and board, books, computers, and up to $10,000 per year for K-12 tuition.
The parent (or account owner) retains full control of the account indefinitely. There is no age at which control transfers to the beneficiary. The beneficiary can be changed to any qualifying family member at any time. There are no required minimum distributions.
Since the SECURE 2.0 Act, 529 plans also allow a lifetime rollover of up to $35,000 to a Roth IRA in the beneficiary's name, subject to a 15-year account age requirement and annual Roth IRA contribution limits.
New Jersey's direct-sold plan is the NJBEST 529 Plan. For NJ residents with gross income of $75,000 or less, NJBEST offers a $750 scholarship match at enrollment. Investment options include age-based portfolios, actively managed funds, index funds, and fixed-income options.
Side-by-Side Comparison Table
| Feature | Trump Account (Section 530A) | 529 Plan (Section 529) |
|---|---|---|
| Year created | 2025 (OBBBA) | 1996 |
| Eligibility | Under 18 with SSN | Any individual, no age or income limits |
| Annual contribution limit | $5,000 (indexed for inflation starting 2028) | No federal limit; NJ NJBEST lifetime max $305,000 |
| Federal tax deduction | None for individual contributors | None |
| NJ state tax deduction | None | Up to $10,000/year if gross income is $200,000 or less |
| Investment options | U.S. equity index fund only; 0.10% fee cap | Flexible: age-based, active, index, fixed income |
| Tax on growth | Tax-deferred | Tax-deferred |
| Qualified distributions | Taxed as ordinary income (retirement) | 100% tax-free (education expenses) |
| Non-qualified withdrawal penalty | 10% penalty on entire taxable portion | 10% penalty on earnings only; basis withdrawn penalty-free |
| Account control | Transfers to child at age 18 | Parent retains control indefinitely |
| FAFSA impact | Student asset: 20% assessment rate | Parent asset: 5.64% assessment rate |
| Beneficiary changes | Cannot change beneficiary | Can transfer to qualifying family members |
| Required minimum distributions | Yes (standard IRA rules after retirement age) | None |
| Roth conversion | Allowed after age 18 | $35,000 lifetime rollover to Roth IRA (15-year rule) |
| Government seed money | $1,000 for births 2025-2028 | None (NJBEST offers $750 match if income is $75,000 or less) |
| Employer contributions | Up to $2,500/year excludable under Section 128 | Treated as taxable compensation to the employee |
Tax Treatment: The Critical Difference
This is the single most important distinction between these two accounts, and it is the reason the 529 wins for education funding in almost every scenario.
529 Plan: Tax-free growth for education. Contributions go in after tax. Growth is never taxed if used for qualified education expenses. A family contributes $85,000 over 17 years, the account grows to $129,200, and every dollar comes out tax-free for college. The $44,200 in growth is never taxed. Not as ordinary income, not as capital gains. Zero.
Trump Account: Tax-deferred growth for retirement. Contributions go in after tax. Growth is tax-deferred, not tax-free. When the child eventually takes distributions in retirement, the entire taxable portion (growth plus any deductible employer contributions) is taxed as ordinary income. This is the same treatment as a traditional IRA. The tax is not eliminated — it is postponed.
For education purposes, the 529 is strictly superior on tax treatment. The Trump Account's advantage lies in its retirement savings function: the government seed money, the employer contribution exclusion, and the forced long-term savings discipline.
The Non-Qualified Withdrawal Penalty Difference
If funds are withdrawn for non-qualified purposes, the penalty structures are different and the 529 is more forgiving.
529 Plan non-qualified withdrawal: The 10% penalty applies only to the earnings portion of the withdrawal. Your contributed basis comes out penalty-free and tax-free. If you contributed $85,000 and the account is worth $129,200, the earnings are $44,200. A full non-qualified withdrawal triggers a 10% penalty on $44,200 ($4,420) plus ordinary income tax on the $44,200. Your $85,000 basis is returned without penalty or tax.
Trump Account non-qualified withdrawal: The 10% early withdrawal penalty (under IRC Section 72(t), same as traditional IRA rules) applies to the entire taxable portion of the distribution. Since contributions were not deductible for individuals, your basis is returned tax-free, but the treatment of employer contributions and the government seed (which were excludable from income) follows traditional IRA distribution rules. The penalty structure is less favorable than the 529 for early withdrawals.
Scenario Analysis: Three NJ Family Income Levels
All three scenarios assume a child born in 2026, contributions of $5,000 per year to each account for 17 years (ages 0-16), and the child attends a 4-year college. The Trump Account assumes a 7% average annual return (100% U.S. equity index). The 529 assumes a 5% average annual return (age-based portfolio that shifts to bonds over time). These return assumptions reflect the investment constraints of each account.
Scenario 1: NJ Family — Gross Income $75,000 (Qualifies for NJBEST Match)
529 Plan:
- Total contributions: $85,000 over 17 years
- NJBEST $750 scholarship match at enrollment
- NJ state deduction: $10,000/year at 5.525% marginal rate = $552.50/year in NJ tax savings
- Total NJ tax savings over 17 years: approximately $9,393
- Account value at age 17 (5% return): approximately $129,200
- Tax on qualified education withdrawal: $0
- Net value for education: $129,200 plus $9,393 in cumulative tax savings plus $750 NJBEST match
Trump Account:
- Total contributions: $85,000 over 17 years
- Government seed: $1,000 (growing to approximately $3,159 at 7% over 17 years)
- NJ state deduction: $0 (no NJ deduction for Trump Account contributions)
- Account value at age 17 (7% return): approximately $157,359 (includes seed growth)
- If used for non-education purposes (retirement): taxed as ordinary income on growth in retirement
- If withdrawn early for education: 10% penalty plus ordinary income tax on taxable portion
- Approximate tax on growth at 15% effective rate in retirement: $10,853
- Net after-tax value: approximately $146,506
Analysis: For education spending, the 529 wins decisively. The combination of tax-free withdrawals, the NJ state deduction ($9,393 cumulative), and the NJBEST match ($750) makes the 529 worth approximately $129,200 + $10,143 in benefits versus the Trump Account's $157,359 raw balance that faces future taxation. For retirement savings, the Trump Account provides $157,359 in tax-deferred growth plus the discipline of a locked retirement vehicle.
Scenario 2: NJ Family — Gross Income $150,000
529 Plan:
- Total contributions: $85,000
- No NJBEST match (income exceeds $75,000 threshold)
- NJ state deduction: $10,000/year at 6.37% marginal rate = $637/year in NJ tax savings
- Total NJ tax savings over 17 years: approximately $10,829
- Account value at age 17 (5% return): approximately $129,200
- Tax on qualified education withdrawal: $0
- Net value for education: $129,200 plus $10,829 in cumulative tax savings
Trump Account:
- Total contributions: $85,000
- Government seed: $1,000 (growing to approximately $3,159)
- NJ state deduction: $0
- Account value at age 17 (7% return): approximately $157,359
- If employer offers Section 128 contributions ($2,500/year): account could reach approximately $226,880 (additional $42,500 in employer contributions plus growth)
- Approximate tax on growth at 22% effective rate in retirement: approximately $15,918 (without employer) or $31,214 (with employer contributions)
- Net after-tax value: approximately $141,441 (without employer) or $195,666 (with employer)
Analysis: The 529 remains the stronger education vehicle. But if the parent's employer offers Section 128 contributions, the Trump Account becomes extraordinarily powerful as a retirement vehicle — potentially worth $195,666 after tax, with $42,500 of that coming from employer money the family would not otherwise receive. The rational move is to fund both: 529 for education, Trump Account to capture the employer benefit.
Scenario 3: NJ Family — Gross Income $250,000
529 Plan:
- Total contributions: $85,000
- No NJBEST match
- NJ state deduction: $0 (gross income exceeds $200,000 threshold)
- Account value at age 17 (5% return): approximately $129,200
- Tax on qualified education withdrawal: $0
- Net value for education: $129,200 (no NJ tax benefit at this income level)
Trump Account:
- Total contributions: $85,000
- Government seed: $1,000 (growing to approximately $3,159)
- Account value at age 17 (7% return): approximately $157,359
- Approximate tax on growth at 24% effective rate in retirement: approximately $17,366
- Net after-tax value: approximately $139,993
Analysis: At $250,000+ income, the NJ 529 deduction disappears, but the 529 still wins for education because withdrawals are tax-free. The Trump Account's $157,359 balance exceeds the 529's $129,200 in raw terms (due to the higher equity return), but the tax-free treatment of 529 distributions makes the effective values closer. The Trump Account shines here as a supplemental retirement vehicle — especially since high-income families are more likely to have employers offering Section 128 contributions.
When the Trump Account Wins
The Trump Account is the better choice (or the more valuable supplemental account) in these situations:
1. The child does not attend college. If your child pursues a trade, starts a business, or otherwise does not incur qualified education expenses, the 529's tax-free withdrawal advantage disappears. Non-qualified 529 withdrawals face a 10% penalty on earnings plus ordinary income tax. The Trump Account was designed for retirement from the start — no penalty for its intended use. For families considering traditional IRA vs. Roth IRA strategies in NJ, the Trump Account adds another retirement planning dimension.
2. The parent's employer offers Section 128 contributions. This is the Trump Account's killer feature. Up to $2,500 per year in employer contributions excluded from the employee's gross income. Over 17 years with growth, employer contributions alone could add $60,000+ to the account. No 529 plan offers anything comparable. The 529's employer contribution equivalent is simply additional taxable compensation.
3. The family wants forced savings discipline. The Trump Account locks funds until retirement age (with early withdrawal penalties). For families concerned about a child accessing funds too early, the Trump Account provides structural protection. The 529 has no such lock — the account owner can withdraw at any time.
4. The child is born between 2025 and 2028. The $1,000 government seed contribution is free money. At 7% annual return over 50+ years (to retirement), that $1,000 grows to approximately $29,457. Even if you never contribute another dollar, the seed alone creates a meaningful retirement balance.
5. You want pure equity exposure for a long time horizon. The Trump Account's mandated U.S. equity index fund with a 0.10% fee cap is actually an advantage for a multi-decade investment horizon. No temptation to time the market, no drag from high fees, no drift into conservative allocations too early. For a newborn's retirement account, 100% equities for 18 years is arguably the optimal allocation.
When the 529 Plan Wins
The 529 Plan is the better choice for education funding in virtually every scenario:
1. Education is the primary goal. Tax-free growth and tax-free withdrawals for qualified education expenses is the most powerful tax benefit available for college savings. No other account type — not the Trump Account, not a Roth IRA, not a taxable brokerage — offers 100% tax-free treatment of investment growth used for education.
2. You want FAFSA protection. A 529 owned by a parent is assessed at 5.64% for FAFSA Expected Family Contribution (EFC) purposes. A Trump Account is a student asset assessed at 20%. On a $130,000 balance, the FAFSA assessment difference is $18,668 (Trump Account: $26,000 vs. 529: $7,332). For families expecting to qualify for need-based financial aid, this difference can reduce aid eligibility by thousands of dollars.
3. You want parent control. The 529 account owner (typically a parent) retains full control indefinitely. You decide when to withdraw, how much, and for whom. You can change the beneficiary to another qualifying family member — a sibling, cousin, or even yourself. The Trump Account transfers to the child at 18 with no parental override.
4. You want tax-free growth, not tax-deferred growth. The distinction between tax-free (529) and tax-deferred (Trump Account) is the difference between zero tax and postponed tax. Over a long investment horizon, the value of tax-free compounding is enormous. A family in the 24% federal bracket withdrawing $129,200 tax-free from a 529 keeps $129,200. The same family withdrawing $129,200 from a Trump Account in retirement keeps approximately $98,192 after federal tax on the growth.
5. You want investment flexibility. The 529 offers age-based portfolios, aggressive equity options, balanced funds, and fixed-income options. You can adjust your allocation as the child approaches college. The Trump Account offers exactly one option: a U.S. equity index fund. For families who want a glide path from equities to bonds as college approaches, only the 529 provides that.
6. You live in New Jersey and earn under $200,000. The NJ state income tax deduction of up to $10,000 per year is worth $553 to $637+ annually depending on your marginal rate. Over 17 years of contributions, cumulative NJ tax savings range from $9,393 to $10,829. The Trump Account offers no NJ deduction at any income level. See my NJ capital gains tax guide for more on how NJ taxes investment income differently from the federal system.
NJ-Specific Considerations
New Jersey residents face several unique factors that tilt the comparison further toward the 529 for education purposes.
The NJ 529 State Income Tax Deduction
New Jersey allows a state income tax deduction of up to $10,000 per year for contributions to any state's 529 plan (not just NJBEST) if the taxpayer's New Jersey gross income is $200,000 or less. This is reported on NJ-1040, Line 49. For a family contributing $10,000 per year at the 6.37% marginal NJ rate, that is $637 per year in NJ tax savings — real money that compounds over 17 years of contributions.
The Trump Account has no NJ state income tax deduction. OBBBA did not create a state-level deduction, and New Jersey has not enacted one independently. Every dollar contributed to a Trump Account is fully taxed at the state level in the year earned. This is a significant NJ-specific disadvantage.
NJBEST $750 Scholarship Match
New Jersey residents with gross income of $75,000 or less who open a NJBEST 529 Plan receive a $750 initial scholarship deposit from the state. This is not a deduction — it is a direct contribution to the 529 account. Combined with the annual deduction, NJ lower-income families receive substantial state support for 529 plans that has no Trump Account equivalent.
Section 128 Employer Contributions and NJ Gross Income Tax
Employer contributions to a Trump Account under IRC Section 128 are excluded from federal gross income. However, New Jersey Gross Income Tax (GIT) does not automatically conform to federal exclusions. Historically, NJ has been selective about adopting federal exclusions — the state did not adopt the federal Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) exclusion, for example.
As of March 2026, the NJ Division of Taxation has not issued guidance on whether Section 128 employer contributions to Trump Accounts are excluded from NJ gross income. If NJ does not conform, employer contributions that are excluded federally would still be taxable for NJ GIT purposes. Families should monitor NJ Division of Taxation Technical Bulletins for updates. This friction reduces the after-tax value of employer contributions for NJ residents.
NJ Does Not Tax 529 Qualified Distributions
Qualified distributions from 529 plans are excluded from both federal and NJ gross income. This means NJ families using 529 funds for education pay zero state tax on growth. Trump Account distributions in retirement will be subject to NJ income tax (NJ taxes retirement income above certain thresholds, with no preferential rate for long-term capital gains). See my NJ capital gains tax guide for details on how NJ taxes investment income.
The "Open Both" Strategy
For most New Jersey families with children born 2025-2028, the optimal strategy is to open both accounts:
Step 1: Open a NJBEST 529 Plan at birth. Capture the $750 NJBEST match if income qualifies. Begin contributing up to $10,000 per year to maximize the NJ state deduction. Choose an age-based portfolio that automatically shifts from equities to bonds as the child approaches college.
Step 2: Open a Trump Account at birth. Capture the $1,000 government seed contribution. Contribute up to $5,000 per year (or less, depending on your budget after 529 contributions). If your employer offers Section 128 contributions, ensure you are enrolled — this is free money.
Step 3: Prioritize based on your family's situation.
- If education is the primary goal and your budget is limited, prioritize the 529 up to the NJ deduction limit ($10,000) before funding the Trump Account.
- If your employer offers Section 128 contributions, prioritize capturing the full employer match in the Trump Account before maximizing 529 contributions.
- If you can afford both, contribute $10,000 to the 529 (capturing the full NJ deduction) and $5,000 to the Trump Account (capturing the maximum annual limit plus any employer match).
Step 4: Review annually. As your income changes, the NJ 529 deduction may phase in or out at the $200,000 threshold. Adjust contribution allocations accordingly. If your employer adds or removes Section 128 benefits, update your Trump Account contributions.
The combined annual outlay for a family maximizing both accounts is $15,000 ($10,000 to the 529 + $5,000 to the Trump Account). Over 17 years, that is $255,000 in total contributions across both accounts. With employer contributions and growth, the combined balance could exceed $350,000 — a mix of tax-free education funds and tax-deferred retirement savings that gives your child both a funded education and a head start on retirement.
Frequently Asked Questions
Can I contribute to both a Trump Account and a 529 Plan for the same child?
Yes. There is no rule preventing contributions to both accounts for the same beneficiary. The accounts serve different purposes (retirement vs. education) and have separate contribution limits. The Trump Account limit is $5,000 per year. The 529 has no annual federal limit (NJ lifetime max is $305,000). You can fund both simultaneously.
Is there a tax deduction for Trump Account contributions?
No. Individual contributions to Trump Accounts are not deductible for federal or NJ state income tax purposes. The tax benefit is tax-deferred growth, not an upfront deduction. This is a key difference from employer contributions, which are excluded from the employee's federal gross income under Section 128.
What happens to the Trump Account when my child turns 18?
The account transfers to the child's control. The child can continue contributing (subject to IRA rules), convert to a Roth IRA, or leave the account invested for retirement. The parent has no further control over the account after the transfer. This is a significant difference from the 529, where the parent retains control indefinitely.
Can I change the beneficiary on a Trump Account?
No. The Trump Account is tied to the child named at account creation. You cannot transfer the account to a sibling, cousin, or other family member. If the child does not need the funds for retirement (unlikely, but possible), the account remains theirs. The 529 allows beneficiary changes to any qualifying family member at any time.
What is the FAFSA impact of each account?
A 529 Plan owned by a parent is reported as a parent asset on the FAFSA and assessed at a maximum rate of 5.64% of the asset value. A Trump Account is a student asset (since the child is the account holder) and assessed at 20% of the asset value. On a $100,000 balance, the FAFSA assessment is $5,640 for a parent-owned 529 versus $20,000 for a Trump Account — a difference of $14,360 in Expected Family Contribution. For families expecting need-based financial aid, the 529's lower FAFSA assessment is a significant advantage.
Can Trump Account funds be used for college?
Not without penalty. The Trump Account is designed for retirement. Withdrawals before retirement age are subject to a 10% early withdrawal penalty plus ordinary income tax on the taxable portion (same as traditional IRA rules). There is no education expense exception for Trump Account withdrawals. If you want tax-advantaged college funding, the 529 is the correct vehicle.
What if my child does not go to college?
This is where the Trump Account provides insurance. If your child does not attend college, the Trump Account continues growing for retirement with no penalty — that is its intended purpose. The 529 funds face a 10% penalty on earnings for non-qualified withdrawals, though you can change the beneficiary to another family member, roll up to $35,000 into a Roth IRA (after 15 years), or hold the funds for potential future education expenses including graduate school.
What is the government seed contribution?
Children born between 2025 and 2028 receive a $1,000 government seed contribution deposited directly into their Trump Account. This is funded by the federal government under Section 70602 of the OBBBA. There is no income test — all eligible children receive the seed regardless of family income. At 7% annual return, the $1,000 seed grows to approximately $3,159 by age 17 and approximately $29,457 by age 65.
How do employer Section 128 contributions work?
Under new IRC Section 128 (created by OBBBA Section 70604), employers can contribute up to $2,500 per year to an employee's child's Trump Account. The contribution is excluded from the employee's federal gross income — the employee pays no federal income tax or payroll tax on the amount. The employer deducts the contribution as a business expense. Not all employers offer this benefit. Check with your HR department. NJ conformity with the Section 128 exclusion has not been confirmed as of March 2026.
Can I roll a Trump Account into a Roth IRA?
Yes, after the child turns 18. The account can be converted to a Roth IRA, with the taxable portion of the conversion included in the child's gross income for the year of conversion. Since the child likely has low income at 18, the conversion tax rate may be very favorable. This is a powerful strategy: contribute to the Trump Account during childhood (capturing the seed and employer money), then Roth-convert at 18 when the child's tax rate is near zero.
Can I roll a 529 into a Roth IRA?
Yes, with limits. Under the SECURE 2.0 Act, 529 beneficiaries can roll up to $35,000 lifetime from a 529 into a Roth IRA in their name, subject to two conditions: (1) the 529 account must have been open for at least 15 years, and (2) annual rollovers cannot exceed the Roth IRA annual contribution limit ($7,500 for 2026 for those under 50). This means the full $35,000 rollover takes at least 5 years of annual rollovers.
Which account has better investment returns?
Historical data favors the Trump Account's 100% U.S. equity index approach for long time horizons. The S&P 500 has returned approximately 10% annualized over the past 30 years. After the 0.10% fee cap, the expected return is approximately 7-10% over multi-decade periods. The 529's age-based portfolios typically start at 80-90% equities and shift to 20-30% equities by college age, resulting in lower expected returns (historically 5-7% blended) but less volatility when the money is needed. For a retirement account with a 50+ year horizon, 100% equities is expected to outperform. For education savings with an 18-year horizon, the glide path approach reduces the risk of a market crash right before tuition is due.
Do Trump Accounts have required minimum distributions?
Yes. Once the account holder reaches the applicable age (currently 73, rising to 75 in 2033 under SECURE 2.0), required minimum distributions (RMDs) apply under standard IRA rules. This is a significant difference from the 529, which has no RMDs. The Roth conversion strategy mentioned above eliminates RMDs, since Roth IRAs have no RMDs during the owner's lifetime.
What is the $5,000 annual limit — per child or per family?
Per child. Each eligible child under 18 can receive up to $5,000 per year in combined contributions from all sources (parents, grandparents, other individuals). Employer contributions under Section 128 are a separate $2,500 limit on top of the $5,000. So the maximum annual funding for one child's Trump Account is $7,500 ($5,000 individual + $2,500 employer).
Should I open a Trump Account if my child was born before 2025?
Yes, if the child is under 18. Children born before 2025 are eligible for Trump Accounts but do not receive the $1,000 government seed contribution (which is limited to births 2025-2028). The account still offers tax-deferred growth, the 0.10% fee cap, employer Section 128 contributions, and forced retirement savings discipline. The younger the child, the more valuable the tax-deferred compounding.
How does this compare to just opening a custodial Roth IRA for my child?
A custodial Roth IRA requires the child to have earned income. A newborn or toddler has no earned income, making Roth IRA contributions illegal. The Trump Account has no earned income requirement — contributions can be made from birth. Once the child has earned income (from a part-time job, for example), contributing to both a Roth IRA and a Trump Account is the optimal retirement savings strategy. For a detailed comparison of traditional and Roth IRA strategies for NJ residents, see my Traditional IRA vs. Roth IRA NJ guide.
Circular 230 Disclosure: This post provides general tax information and is not a substitute for personalized tax advice. Consult a qualified tax professional for advice specific to your situation.
