By Suzanne McGee and Ann Saphir
Feb 26 (Reuters) – President Donald Trump on Tuesday used his State of the Union address to announce a program that could help tens of millions of Americans save for retirement, giving those without access to an employer-sponsored retirement plan a vehicle to do so.
Here’s what we know about the plan – which matches worker contributions by up to $1,000 annually – the problem it’s designed to address and the questions it raises:
DOES AMERICA HAVE A RETIREMENT PROBLEM?
Half of American workers aged between 21 and 64 have $955 or less saved for retirement, according to a report from the National Institute on Retirement Security.
Of those with access to an employer-provided retirement, such as a 401(k), half have less than $40,000 saved. That is a fraction of what they will need, experts suggest. Respondents to a 2025 survey by asset manager BlackRock said they would need $2 million to retire comfortably. “Almost no one is close,” CEO Larry Fink wrote in his annual letter to investors.
Even investors close to retirement fall well short: the survey found that 62% of Gen X investors, whose ages range from 46 to 61, have saved less than $150,000.
Younger workers may defer paying into a retirement fund because of student loan repayments or to save for a down payment on a home. But because contributions made early on can grow tax-free for longer, any delay can be very costly for younger Americans trying to build a nest egg.
HOW MANY AMERICANS COULD BENEFIT?
Nearly 54 million American workers have no access to any employer-provided retirement plan, research from the Economic Innovation Group shows. Some 63 million people do not have access to an employer match, a feature that financial advisors repeatedly describe as the “only free lunch in investing” and key to reaching retirement savings goals over time.
IS THIS THE FIRST TIME THAT A US PRESIDENT HAS TACKLED THE RETIREMENT CRISIS IN A STATE OF THE UNION ADDRESS?
In 2014, former President Barack Obama announced the creation of MyRA, retirement accounts overseen by the Treasury Department, into which savers could deposit after-tax funds and that featured principal protection. For myriad reasons, these didn’t catch on and the first Trump administration killed the program in 2017. Under revisions to retirement plans signed into law by former President Joe Biden in 2022, low- to moderate-income households starting next January will qualify for a government match for 50% of their retirement savings contributions, up to $1,000 annually.
WHAT’S THIS NEW PLAN, EXACTLY?
As outlined by Trump, the program would have two parts. Workers who don’t already have access to an employer-sponsored retirement plan would get access to a program like the Thrift Savings Plan, available to federal workers currently. The government would match employee contributions to both these plans and existing employer plans with no match, up to $1,000 annually. Congressional action would be needed to expand the size of the match. The plans would offer investors an array of low-cost index funds from which to choose, making them more appealing than MyRA accounts, says Craig Bolanos, co-founder of VestGen Wealth Partners.
WHY NOT SHORE UP SOCIAL SECURITY?
The average American depends on the government’s Social Security program for the majority of income during retirement. But the program is not on a sustainable trajectory, projections show. Reserves that help cover the program’s outlays are projected to run out by 2033, with ongoing payroll taxes expected to cover less than 80% of the current rate of benefits. Filling the gap could mean some combination of increasing the age at which beneficiaries become eligible, reducing benefits, or confining benefit payouts to lower-income Americans, all of which politically are non-starters. And as BlackRock’s Fink has noted, Social Security is a safety net, not a recipe for financial security.
WHAT ARE THE HURDLES?
The plan is light on details. The administration will need to build public awareness. The State of the Union announcement may help, financial advisors say, but also make it easy for people to act. Research has shown that the simpler it is for investors to save, or even automatic, the more likely they are to do so. Moreover, even if uptake is strong, there is no guarantee that lower-income Americans faced with other affordability challenges will be willing or able to contribute. “Most of them are not flexible with their cash flow to even consider putting money aside,” says Green Bee Advisory’s Catherine Valega.
There are also questions about the cost to the government, already running a substantial budget deficit, and whether there could be more efficient means – perhaps by bolstering an existing program like Social Security – to improve Americans’ retirement security.
But some welcome the initiative. Michael Lofley, a financial advisor at HBKS in Florida, said that one of his clients, a small business owner who already offers a 401(k) plan to his 10 employees, is considering adding these, and the related “Trump accounts” for his employees’ children, as part of the suite of benefits he offers.
(Reporting by Ann Saphir and Suzanne McGee; additional reporting by Steve Holland and Andy Sullivan in Washington; Editing by Sharon Singleton)
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