During the State of the Union address on Tuesday, President Donald Trump unveiled a new plan to help millions of workers save for retirement.
Trump said his administration will roll out new federally administered retirement accounts geared toward the nearly 60 million Americans who don’t currently have access to a retirement benefits through their employer. The goal, he said, is to fix a “gross disparity” in retirement savings between workers who have 401(k)s and those who don’t.
“Next year, my administration will give these often forgotten American workers — great people, the people that built our country — access to the same type of retirement plan offered to every federal worker,” Trump said during his record-long speech.
Federal workers have access to retirement accounts called Thrift Savings Plans, or TSPs, which boast low administrative fees and an array of index- and target-date funds to choose from. Trump’s proposal builds upon these accounts to grant everyday workers in the private sector similar tools to save for retirement.
How would the federal retirement accounts work?
Aside from the new retirement accounts being based largely on TSPs, details about how exactly they will operate and when they will roll out are sparse.
What we do know is that the accounts are aimed at workers who do not already have one through their employer. That translates to about half of all private-sector workers, according to Pew Research, or about 56 million Americans.
These retirement accounts are also an entirely different proposal from Trump Accounts, which are investment-savings accounts that give kids exposure to the stock market at a young age so that their savings are substantial by the time they reach adulthood or retirement.
A key part of Trump’s latest proposal that is garnering bipartisan praise is that he pledged to match contributions into the new retirement accounts — up to $1,000 per year — mirroring a popular employer perk for 401(k)s.
“It was encouraging to see at the State of the Union broad, bipartisan support for expanding access to retirement savings,” says Dan Doonan, executive director at the nonpartisan National Institute on Retirement Security. “Retirement insecurity is a real and growing challenge, and any serious proposal that increases coverage deserves thoughtful consideration.”
What’s particularly unique about this contribution match is that the benefit won’t be tied directly to employers. The accounts will be “portable,” meaning they will remain in place along with the matching benefits regardless of whether a worker changes or loses a job.
“Expanding access is a meaningful step,” Teresa Ghilarducci, director of the Wealth Equity Lab, said in response to the proposal. She added that, for decades, the U.S. has tolerated a system that makes it difficult for workers — especially part-time and gig workers — to save for retirement.
“Addressing that coverage gap is not trivial,” she said.
The White House has not shared specifics yet on when the accounts will be available for enrollment, but the Trump administration maintains that it has the authority under current law to create the accounts and fund the contribution-matching benefits without congressional approval, although Congress could enhance the program through additional legislation.
Experts have read between the lines to suggest that the contribution matching may rely on a forthcoming federal tax credit called the Saver’s Match. Through the SECURE 2.0 retirement reform package, the Saver’s Match credit will provide 50% contribution matching into individual retirement accounts (IRAs), up to $1,000 for eligible individuals and $2,000 for couples.
This credit is separate from Trump’s new retirement account proposal and will be available to retirement savers in 2027.
Despite this justification, some experts are skeptical about the administration’s authority to create the program without Congress.
“The details are still limited, but meaningful and durable reform would likely require Congressional action,” Doonan says. “Legislation would provide clearer authority, greater flexibility in program design and the stability needed to ensure long-term success.”
Retirement deja vu?
Eight years ago, former President Barack Obama stood on the floor of the House of Representatives during his State of the Union address and pitched a “new way for working Americans to start their retirement savings.”
“A Social Security check often isn’t enough on its own,” Obama said. “And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s.”
The solution, he said, was myRA, a portable retirement savings account for workers who don’t have access to an employer-sponsored plan.
The program was officially launched by the Treasury Department in November 2015, but myRAs were largely a flop due to low enrollment, the limited investment options and a $15,000 contribution cap.
“MyRA relied on individuals to learn about the program, seek it out and actively enroll. Those behavioral hurdles significantly limited participation,” Doonan says.
By 2017, only 30,000 accounts had been opened, and Trump had taken office. Under new leadership, the Treasury Department shuttered the program, citing high maintenance costs and low enrollment.
Now the Trump administration is ready to give universal retirement accounts another shot. As with myRAs, Trump’s retirement accounts appear likely to be enacted without new legislation. That speeds up the implementation process but leaves them vulnerable to dismantling by a subsequent administration.
Low enrollment is another hurdle that could beset the program. But this time, the White House is pushing broader investment options and annual contribution matching as major incentives.
For this program to be a success, Doonan emphasizes the need for participation to be seamless — for both businesses and workers.
“Automatic enrollment, payroll integration and simplicity would be essential to avoiding the pitfalls of past efforts,” he says.
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