Millions of workers in the United States who currently lack access to employer-sponsored retirement plans may soon have a new option for saving for their future, thanks to a proposal from President Donald Trump. During a recent State of the Union address, Trump highlighted that approximately half of American workers do not have retirement plans that include matching contributions from employers. To address this gap, he announced that, starting next year, his administration will provide these often-overlooked workers with access to retirement plans similar to those available to federal employees.
The proposed initiative aims to establish a universal savings account that would be portable for workers who change jobs. This account would function similarly to the Thrift Savings Plan (TSP) utilized by federal employees, which offers government matching contributions and low-cost, index-based investment options. While the exact details of how the proposed savings accounts will be taxed remain uncertain, they are expected to follow the TSP model, allowing contributions to be made on a tax-advantaged basis.
Currently, 56 million Americans do not have access to workplace retirement plans, with a significant proportion being low-income workers. According to research from a 2021 study co-authored by Teresa Ghilarducci, a professor at The New School, many who are excluded from current retirement systems earn less than $53,000 per year. The proposed plan recognizes the disparity in retirement savings opportunities and seeks to provide a means for these individuals to start accumulating funds for their retirement.
In addition to the promise of a universal account, the proposal includes a government matching contribution of up to $1,000 for eligible workers, potentially linking it to provisions from legislative frameworks like Secure 2.0, set to take effect in 2027. This would allow workers meeting specific income thresholds to receive a 50% match on their annual savings.
Experts in retirement planning express cautious optimism regarding the plan, emphasizing the need for careful consideration of how it would integrate with existing social welfare programs. Concerns include ensuring that the new accounts do not disqualify beneficiaries from critical support programs like Supplemental Security Income, which imposes strict asset limits.
As discussions continue about the specifics of the retirement accounts, experts have noted the importance of structuring accounts to allow for diversification of investments and easy access in times of emergency. Many retirement accounts are currently relied upon as emergency savings, which can hinder participants’ ability to grow their retirement funds effectively.
The Trump administration’s proposal could complement existing state-led efforts that have made strides in providing automatic IRA options for workers without employer-backed plans. In total, 17 states have passed legislation to establish these options, highlighting a growing recognition of the need to expand retirement savings access.
The anticipated launch of the plan aligns with ongoing concerns about the financial impact of under-saving on state and federal budgets. Experts advocate that providing accessible saving options will not only assist individuals in building their retirement funds but may also alleviate future burdens on government resources.
As lawmakers and retirement advocates consider the details and logistics of implementing such a proposal, the overarching goal remains clear: to significantly increase participation in retirement savings among American workers, ensuring more individuals can build a secure financial future.
