President Donald Trump signed an executive order last week creating a new pathway for working-class Americans to save for retirement. But what will the “Trump IRAs” actually accomplish?
About 56 million Americans “lack access to an employer-sponsored retirement plan at work,” said CNBC. The president’s order in 2027 will create a new website, TrumpIRA.gov, where those workers can “research, compare and enroll in private-sector individual retirement accounts” on their own. Low-income working Americans may even be eligible for a yearly matching contribution of $1,000 from the federal government.
The program could amount to the “largest potential expansion of retirement coverage since Social Security,” Teresa Ghilarducci, the director of the Wealth Equity Center at the New School for Social Research, said to MarketWatch. Other experts say the new effort needs a “more robust match and automatic enrollment” to truly help more workers secure their retirement, said Axios. But “that requires legislation” to pass through Congress.
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Trump’s new retirement plan “carries big political risks,” The Wall Street Journal said in an editorial. There is “nothing to stop Americans” from setting up and contributing to their own IRA accounts without the government acting as a “broker and quasi-sponsor” of private retirement efforts. But IRAs that come with a “government imprimatur” might “squeeze out other private savings options.” Helping Americans save for their senior years is a “worthwhile goal” better achieved by “easing fiduciary regulations” for employer-sponsored plans while “bringing down inflation and growing real wages.”
The president’s proposal requires Congress’ backing to “have teeth,” Elizabeth O’Brien said at Barron’s. Legislation is needed to expand income eligibility for the matching contribution and to “make participation in Trump IRAs automatic.” Workers can already open their own IRAs but often do not “due to lack of knowledge, time to navigate the process or money to contribute.” Without new laws to back Trump’s plan, the new executive order will end up a “well-intentioned effort aimed at a real problem that doesn’t break new ground or live up to the hype.”
Legislation to automatically enroll workers in retirement funds would “create more problems than it solves,” the Cato Institute’s Romina Boccia said at The Washington Post. Such efforts also do “little to solve” the broader issue of “Social Security’s deteriorating finances.” The program faces “long-term shortfalls” of up to $28 billion that could result in benefit cuts starting in 2032. If the president and Congress really want to help Americans have a secure retirement, “they could instead focus on fixing Social Security” and help the seniors “who rely on the program as their primary source of retirement income.”
What next?
Workers making less than $35,000 a year will be eligible for the $1,000 matching contribution, said NBC News. The Trump administration will work with Congress to “significantly expand this program,” and it is “looking forward to legislation this year,” Kevin Hassett, the director of the White House’s National Economic Council, said at the executive order signing.
