MAGA accounts and 529 plans: what families need to know

A new landscape for education savings

As a financial advisor, you know how overwhelming saving for education can feel for parents. They are already juggling daycare costs, after-school activities, and the daily realities of raising a family, all while trying to imagine what college, or other milestones, might look like years down the road.

The passage of the One Big Beautiful Bill Act (OBBBA) in July 2025 adds both new opportunities and new complexities to those conversations. In addition to expanding the reach of 529 plans, OBBBA introduced a brand-new program: MAGA accounts, or Money Accounts for Growth and Advancement accounts. Both vehicles are designed to help families invest in their children’s future, but they do so in very different ways. Advisors can help their clients understand the options, stay grounded in what is proven, and make decisions that align with their goals.

MAGA accounts: appealing but still uncertain

Beginning in 2026, children who are U.S. citizens at birth and born between 2025 and 2028 will receive a $1,000 federal deposit into a MAGA account. Parents and relatives can contribute up to $5,000 annually, with that limit scheduled to rise with inflation after 2027.¹ Contributions will grow on a tax-deferred basis until the child reaches age 18, at which point families can begin making withdrawals. The funds may be used to pay for higher education, to purchase a first home, or to launch a small business. If the account is not used earlier, any remaining balance can be withdrawn for any reason once the child turns 30.

For many parents, this level of flexibility will sound appealing. It allows them to imagine supporting their child not only through school but also as they step into adulthood. However, there are important caveats that need to be considered. Qualified withdrawals are taxed at the long-term capital gains rate, while non-qualified withdrawals are treated as ordinary income and subject to penalties. Rules around financial aid treatment are not yet clear, and as with any new program, implementation details may evolve over time. MAGA accounts have potential, but they are untested. For now, it may be best to view them as a possible supplement rather than a replacement for more established education savings vehicles.

529 Plans: familiar, reliable, and expanded

529 plans, with their long track record, continue to be widely used and reliable vehicles for education savings. They remain a proven and tax-advantaged way to save specifically for education. Contributions grow tax-free, and withdrawals for qualified education expenses such as tuition, books, and room and board are also tax-free. In many states, families receive additional tax benefits on contributions, creating another layer of value.

Thanks to OBBBA, 529 plans have become even more flexible and relevant to today’s families. The annual withdrawal limit for K–12 tuition will double from $10,000 to $20,000 starting in 2026, allowing families greater ability to support private, public, or parochial school education. The definition of qualified expenses has already expanded to include items such as tutoring, standardized test fees, dual-enrollment programs, online coursework, and specialized strategies for students with disabilities. In addition, families can now apply 529 funds toward credential programs recognized by state or federal governments, the military, or the Workforce Innovation and Opportunity Act.

These changes make 529s more than just college savings plans. They are increasingly becoming education savings plans that can cover diverse learning pathways, from traditional four-year degrees to trade schools, certifications, and workforce training. For families who are hesitant to commit because they are unsure what their child’s path might be, this broadened scope provides reassurance that their savings will remain relevant.

How MAGA accounts and 529s can work together

Advisors can help clients see the value of both accounts when they are considered side by side. MAGA accounts provide a free starting point for families, thanks to the government contribution, and they offer flexibility that extends beyond education. The key consideration is not whether to use MAGA accounts, but how they fit alongside other contributions.

This is where the advantages of 529 plans stand out. They are well understood, widely used, and specifically designed to support education expenses. The recent expansions only increase their relevance by ensuring they can support both traditional and non-traditional learning paths. In addition, if balances are overfunded or not used, certain amounts can now be rolled into a Roth IRA, giving families added peace of mind that their savings will not go to waste.

The choice between MAGA accounts and 529s is not an either-or decision. MAGA accounts broaden options for families who want to prepare for a range of future milestones. 529s continue to serve as the foundation, offering tax-free growth and targeted support for education. Using both allows families to take advantage of the strengths of each, rather than feeling forced to pick one path.

The bottom line

When used together, MAGA accounts and 529 plans give families both flexibility and stability in their savings strategy. MAGA accounts introduce a new vehicle with an automatic starting balance, though they carry uncertainties in program rules and implementation. 529 plans have a long record of reliability, with clear tax advantages and an expanded scope that supports a wide range of educational paths. It makes sense to establish both types of accounts. From there, if saving for education and career pathing is the client’s priority, 529 plan accounts are where subsequent contributions should be made through time. In the end, both accounts can benefit families, but 529s remain the proven cornerstone: expanded, flexible, and designed to support learning at every stage.