NEST 529 Plan vs. Trump Account (530A)
Parents and loved ones saving for a child’s future have lots of options. With multiple types of accounts available, it can be difficult to distinguish between the different types of savings accounts. In short, a 529 plan is designed to pay for education and the money withdrawn for any qualified education expense is completely tax-free while a Trump account is structured as an Individual Retirement Account (IRA) designed for long-term wealth building and retirement.
529 accounts offer powerful benefits for those who are saving for their child or loved one’s future education, including:
- • Tax-free growth and withdrawals for education expenses: Money in a 529 account grows tax-free and, when used for qualified education expenses, can be withdrawn tax-free. This is a significant advantage of 529 plans.
- • Flexible and expanded uses: You can use the money in a 529 plan for a variety of educational expenses, including college tuition, K-12 tuition (beginning in 2029), apprenticeship expenses, books and technology needs, credentialing and more.
Additionally, if circumstances change and the beneficiary of a 529 account doesn’t need any or all the funds in their 529 account, there are multiple options:
- • Change the beneficiary to another family member, including yourself
- • Roll unused funds into a Roth IRA
- • Use the funds for apprenticeships, trade school or credentialing programs
- • Take a non-qualified withdrawal, which is subject to taxes and a 10% penalty
A brief summary
Trump accounts are a new program and offer a new savings vehicle for families. These accounts are generally locked until age 59.5, though traditional IRA allow for some penalty free early withdrawals for situations like higher education expenses or a first-time home purchase. However, even those exceptions are still taxed as ordinary income. https://trumpaccounts.gov/
529 accounts offer a Nebraska state income tax deduction (for Nebraska citizens), plus tax-free growth and qualified education withdrawals are completely tax-free. A 529 is more flexible and is still the best way for families to save for future education expenses.
Don’t limit your options by thinking you have to choose either a Trump account or a NEST 529 account. You may have a Trump account with the US Government seed contribution and save for future education expenses with a NEST 529 account. Evaluate how each might fit into your savings plan and future goals. Ready to get started? Visit https://nest529.com/
Click on the links below for a comparison between 529 accounts and Trump accounts, plus answers to two big questions and other frequently asked questions.