President Donald Trump recently announced a plan to address what he called a “gross disparity” in America’s retirement system.
In the State of the Union address, he introduced his proposal to target the roughly 56 million Americans who lack access to employer-sponsored retirement plans, like 401(k)s. It could result in a new government-backed savings option that’s modeled after the Thrift Savings Plan currently available to federal workers.
The president pointed out that while typical 401(k) balances have climbed about $30,000 since he took office, millions of workers without employer plans aren’t seeing those gains. His solution would create retirement accounts that follow workers from job to job.
Furthermore, the federal government would provide matching contributions of up to $1,000 annually. According to CBS News, a White House official said that private philanthropists would also be able to contribute to the new accounts.
The plan would build on the Secure Act 2.0 signed by President Joe Biden in 2022. That legislation established a Saver’s Match program scheduled to launch in 2027.
The retirement savings gap
Americans are facing a retirement crisis. A study by Clever Real Estate found that the average retiree in the U.S. believes they need roughly $824,000 to retire comfortably. But retirees lag behind that number by about $535,000. On average, they have only saved about $289,000.
It’s not looking great for those still working, either. According to the National Institute on Retirement Security (NIRS), the average American worker has less than $1,000 saved for retirement.
The problem hits lower-income workers especially hard. Nearly 79% of full-time workers earning less than $27,400 annually don’t have access to any retirement plan, according to the Economic Innovation Group.
Even workers who manage to save don’t have large stockpiles. The median retirement balance for those with savings stands at just $40,000, per NIRS. That’s a long way from the $824,000 retirees say is needed for a financially secure retirement.
What this could mean for your retirement plans
There’s no telling when or if Trump’s plan will become reality. And if you don’t have retirement savings, you can’t afford to wait for Washington to take action, especially if retirement is around the corner for you.
Individual retirement accounts are available to anyone with earned income, and even small contributions can compound significantly over time.
If Trump’s proposal does move forward, it could provide a meaningful boost for savers who have long been shut out of the current system.
Once you have more than $100,000 in savings, get some advice from a pro. SmartAsset offers a free service that matches you to a vetted, fiduciary advisor in less than five minutes.
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