Recently, President Trump released an executive order establishing a marketplace for individual retirement accounts (IRAs), promoting the Federal Savers Match, and promoting access to investment options for Americans. This is just one of the ways Trump is ensuring more hard-working Americans have access to retirement benefits.
As Social Security moves closer to insolvency and younger generations expect to receive less than full scheduled benefits when they retire, Americans must be able to plan ahead with their savings and investments. This is exactly what the president is promoting with Trump Accounts and the soon-to-come TrumpIRA.gov. While 59% of Americans have some sort of retirement savings plan, only 30% of all taxpayers have an IRA that is not job-dependent. Greater access to IRAs is a great benefit to workers without traditional employment, a growing portion of the workforce.
Another portion of the initiatives to get Americans better retirement savings options is the federal Savers Match. Under the bipartisan SECURE 2.0 Act of 2022, low-income individuals can claim a match from the governemnt of 50% of IRA or retirement plan contributions up to $2,000 per individual. Only those with income below $20,500 ($41,000 for married filing jointly) will qualify for the 50% match, while individuals earning up to $35,500 ($71,000 for married filing jointly) will qualify for the reduced match. This will replace the current federal Saver’s Credit in 2027.
The federal Savers Match may be more effective than the credit in encouraging low-income taxpayers to save for retirement. Only 5.7% of all taxpayers claim the existing credit. Part of this is due to ignorance; only 51% of workers had heard of the credit. Another reason could be that it can only be claimed if individuals have a tax liability and have a retirement account to contribute to. In 2022, 87% of the lowest-earning fifth of households did not hold retirement accounts. A tax credit can only encourage savings if those who qualify for it are able to claim it.
A federal Savers Match, coupled with the resource of TrumpIRA.gov, overcomes many of these issues. Low-income individuals will easily be able to find and open low-cost retirement accounts through the new website, and even individuals with no tax liability will be able to receive the match funds. For low-income families that start saving by age 30, annual contributions of $2,000 and the matching $1,000 in a traditional retirement account can grow to $443,000 by age 65. This saving incentive can greatly change someone’s retirement outlook and create a valuable nest egg.
Bottom Line
President Trump’s recent executive order promoted financial literacy, encouraged savings, and created TrumpIRA.gov. These initiatives will make a big difference for a population that can struggle to put away money for retirement. Paired with the proposed 401(k) rule, hardworking Americans will have greater access to strong investment options than ever before.