Article Urges Families to Reject Trump Accounts, Citing 40% 529 Withdrawal Need
Updated
Updated · AlterNet · Jul 8
Article Urges Families to Reject Trump Accounts, Citing 40% 529 Withdrawal Need
3 articles · Updated · AlterNet · Jul 8
Summary
529 plans, not Trump accounts, are the better choice for most families saving for children because 529 money can still be accessed in emergencies, even with taxes and penalties.
Trump accounts lock funds until age 18, bar asset-allocation changes, and tax investment earnings, while 529 penalties apply only to the earnings portion of non-education withdrawals.
A Vanguard study cited in the article found 2% of 529 accounts make an unqualified withdrawal each year, implying roughly 40% do so over a 20-year holding period.
The piece also argues tax-sheltered accounts skew benefits upward: more than a quarter of households owe no income tax, while top earners can save 37 cents per dollar invested.
It says families should still take the proposed $1,000 government contribution for newborns, but avoid adding their own money to Trump accounts.