Retirement: A new ‘Trump Savings Plan’ for workers

President Trump has a new plan for the government to “give millions of workers a $1,000 a year to boost their retirement savings,” said Michelle Singletary in The Washington Post. During his State of the Union speech last week, Trump said that 54 million workers without access to an employer-sponsored retirement plan will soon be able to open tax-advantaged accounts similar to those for federal employees—and the federal government will match contributions up to $1,000 each year. The idea of matching contributions “piggybacks on a retirement savings program established” during the Biden presidency. But the wrinkle in Trump’s new plan is that he wants more workers to be able to access “the federal government’s low-fee workplace investment program,” and be able to, in his words, “profit from a rising stock market.” But as with many Trump pronouncements, what he says may be “too good to be true.” To qualify for the full $1,000 match, workers would have to put in at least $2,000 per year. That’s a lot to ask of workers currently “struggling to pay for housing and health care.”

Still, the arrival of this option is “welcome news for the millions of Americans without access to a workplace retirement plan, much less an employer match,” said Emily Peck in Axios. Fewer than 20% of America’s lowest earners have a 401(k) today, and Social Security alone isn’t going to cut it for many of them. There are “real policy chops” behind this proposal, which arrives “at a moment when policy wonks are rethinking” a broken retirement system. It’s not hyperbolic to say this could be “one of the most consequential administrative actions in decades,” said Teresa Ghilarducci in Forbes. Millions of workers have “no retirement wealth simply because they lack access to payroll-based savings.” That maps “directly onto income inequality.” Trump’s action won’t “resolve the retirement crisis,” but it will help reduce this “persistent coverage gap.”

This plan has already been tried, said Kathryn Anne Edwards in Bloomberg. In 2015, former president Barack Obama launched MyRA, a program “similar to today’s Trump Savings Plan” that introduced voluntary benefits to those without workplace retirement accounts. What happened? After two years, only 30,000 people joined, and it was “abruptly ended by the Trump administration in 2017.” MyRA failed because “Congress needed to approve auto-enrollment, and it didn’t.” Research has conclusively shown that “what ‘works’ about 401(k)s” is automatic enrollment, which “supersedes” the greatest obstacle to savings: inertia. However, auto-enrollment requires legislation from Congress. “There is great potential for the federal government to help Americans struggling with financial insecurity,” but a White House announcement isn’t going to do much.