In his State of the Union address to Congress this past Tuesday evening, President Trump stated that in 2027 his Administration would give the “half of all of working Americans” without access to 401(k) accounts with matching employer contributions “the same type of retirement plan offered to every federal worker. 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.”
It is unclear from these remarks, or those subsequently offered by Administration officials, whether this is a new proposal requiring legislation and extra federal budget expenditures, a simple statement of what is scheduled to occur under the SECURE 2.0 law passed in 2022 (that is, the saver’s match), or some administrative move to open up the federal employee Thrift Savings Plan (TSP) or another federally sponsored investment plan to all workers for their retirement savings. To clarify matters, this blog post will review relevant legislative facts, recent statistics, and the history of government-sponsored retirement accounts, and offer perspective on retirement policy considerations.
Under the 2022 legislation, the current non-refundable saver’s credit will be replaced in 2027 with a new refundable federal matching contribution paid directly into retirement accounts rather than as a credit on tax returns. Only those 18 years or older, non-dependent, non-full-time students with relatively modest incomes (for married couples filing jointly, the full match is available for incomes up to $41,000, phasing out up to $71,000) who are contributing to a qualified retirement plan (like a 401(k)) or IRA are eligible for the match. The federal government will contribute 50 percent of contributions up to $2,000 per year, or up to $1,000 for an individual. This is in addition to any matching contributions made by employers.
According to the 2022 Survey of Consumer Finances from the Federal Reserve Board, balances in retirement accounts are large and widespread, as seen in the table below.
Focusing on households with heads age 45 and older, that is, those who must be preparing seriously for retirement, among the age 45–54 cohort, more than 60 percent of households have retirement accounts with mean balances of over $300,000 in 2022. For the age 65–74 retirement-age cohort, more than half have retirement accounts with mean balances of more than $600,000 and a median of $200,000. For oldest cohort, it is natural that the percentage holding accounts is lower, as many still have defined benefit plans as their retirement mainstay and balances will be lower as withdrawals are made to meet requirements and support spending in retirement. Moreover, these 2022 statistics are surely an understatement of current values, as, according to Fidelity, the average 401(k) account balance increased by 49 percent from the third quarter of 2022 through the third quarter of 2025. It is unreasonable to expect one hundred percent participation in retirement accounts: among younger workers, family responsibilities are likely a higher priority, and among lower-income workers, payroll taxes for Social Security consume a significant share of their budget, though because Social Security is progressive, it will provide them with a relatively high replacement benefit in retirement.
If President Trump proposal includes only administrative action on investment accounts, it is worth recalling the experience of the Obama Administration’s myRAs, launched in 2014. Designed to appeal to workers without employer-sponsored retirement plans, the program allowed very small contributions placed in a government bond fund like that available in the TSP, structured as Roth IRAs for individuals earning below the applicable income limits, with low risk and no fees. Only 30,000 accounts were opened, and the Trump Administration closed the program in 2017.
In a voluntary retirement savings system like the one the US currently has; policymakers must be careful in crafting government matches. Although non-discrimination requirements in the tax code force employers sponsoring retirement plans to include low-income workers, if the work force of the employer is predominately low-income, as in the retail, hospitality, or food services industries, it may be beneficial for even large employers to simply drop their plans, knowing their employees will gain coverage and support from the federal government. Although the President says repeatedly that he “will always protect Social Security and Medicare” both programs are projected to run out of funds to pay full benefits in about six years, at which point Social Security benefits would be cut by up to 28 percent. Yet there is no talk about what will done at that point without a massive tax increase or ever larger federal borrowing.
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