How relief for the 40 million Americans without a retirement account could work

• President Trump hopes to match retirement savings for private-sector employees without company plans.
• The plan would expand a Biden-era law that helps fund retirement for low-income workers.
• Economists had mixed reviews of the proposal.

A line in Trump's State of the Union address could be good news for hopeful retirees.

President Donald Trump proposed an expansion of retirement savings for Americans without 401(k)s and other employer-provided retirement plans during his Tuesday speech. He said the federal government will soon match individual savings up to $1,000 a year. Over 40 million Americans who work full-time don't have a retirement plan, and nearly 49 million don't have employer matching, according to the Economic Innovation Group.

"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," the president said. "We will match your contribution with up to $1,000 each year, as we ensure that all Americans can profit from a rising stock market."

If the plan comes to fruition, it could help mitigate a financial reality for both blue- and white-collar workers: the safety net often isn't enough to support aging Americans. Business Insider has recently interviewed hundreds of older adults, many of whom live on Social Security. Many told us that they struggle to afford housing, groceries, and healthcare without adequate retirement savings, and others remain in the workforce to make ends meet.

Here's what to know about the plan.

How it will work

Trump's retirement-matching policy is intended for private-sector workers who don't qualify for employer-sponsored plans.

A White House official told Business Insider that the government-matched savings account will operate similarly to the Thrift Savings Program available to federal workers, offering index-based investment options.

The official said that these savings accounts will be available even as workers change jobs, like a typical 401(k), and private philanthropists will be able to contribute money.

By the White House's estimate, the savings-match policy will immediately make 56 million previously uncovered workers eligible to save through a low-fee plan.

Forty-two percent of full-time Americans don't have access to retirement plans at all, and half don't have an employer-match option through their job, EIG researchers found. The National Institute of Retirement Security also reported that the median American worker has just $955 saved for retirement.

Dozens of the nearly 200 workers 80 and older whom Business Insider interviewed last year said that they never worked jobs that set them up with a 401(k) or retirement plan. Many were on their own in preparing for retirement, and without proper financial education, some said they could never get ahead and were reliant on Social Security and work income to get by.

Social Security's trust fund is set to dry out in under a decade, which could result in cuts to monthly checks of over 20%. Though Trump mentioned protecting Social Security in his address, he offered no plan to address the funding gap.

In an interview after the State of the Union address, Treasury Secretary Scott Bessent told NBC News that the plan "is going to be a very big part of working Americans' retirement program because there is a tremendous amount of financial insecurity." He added that 38% of Americans have no exposure to the equity market, and this plan, coupled with Trump Accounts for children, could expand access.

The White House has not outlined a timeline for the program's rollout but said Trump will share updated details soon. The administration hasn't specified whether the program will have any age, income, or working-hour requirements.

The 2022 SECURE 2.0 law made similar federal retirement matching available to some low-income Americans — and the White House hopes to build on this existing framework. But enacting the policy at a wider scale would likely need Congressional approval.

What economists are saying

Some economists praised the plan as a step in the right direction for closing the wealth gap. Teresa Ghilarducci, a labor economist at The New School who studies retirement security, told Business Insider that Trump's plan could help close the retirement coverage gap for many lower-income workers if it's implemented effectively. She described the plan as "incremental but nontrivial."

"While Traditional and Roth IRAs are available to those without employer coverage, these accounts can feel intimidating for individuals who are less confident in managing their finances. A government-administered plan established through an election on an annual tax return could lower the barrier to entry and provide a visible incentive to contribute through a matching benefit," Bankrate financial analyst Stephen Kates told Business Insider, adding that many questions remain about eligibility rules and how assets will be handled.

The Trump administration did not fully address how the $1,000 match would be funded. Romina Boccia, director of budget and entitlement policy at the Cato Institute, said that the administration lacks the fiscal authority to carry this out.

Boccia added that "the real problem isn't a shortage of government-sponsored savings vehicles."

"Many low-income and younger earners don't participate in 401(k)s because it often doesn't make economic sense for them," Boccia told Business Insider. "They face pressing short-term needs — housing, emergencies, education, starting a family — and locking up savings until age 59½ with penalties for early access can leave them worse off."

Ghilarducci called out weakened pensions, static wages, and tax subsidies that disproportionately benefit higher-income earners as other issues standing in the way of many workers retiring. Additionally, she wrote in a note after the State of the Union that the plan "does not substantially change the regressivity of existing retirement tax expenditures, nor does it change the voluntary architecture that has produced large wealth gaps."

"Access alone does not ensure adequacy or equity, and the accounts must not be used to reduce eligibility for relief programs or take away from Medicare," Ghilarducci wrote. "Progressives could use this as an opening to lift up the need for Social Security funding and a universal supplement."