Trump Proposes New Retirement Plan
President Trump pitched a new retirement plan with federal matching contributions for workers without access to 401(k)s, targeting gig workers and part-time employees. The plan aims to boost retirement savings for groups traditionally excluded from employer-sponsored plans. Separately, financial experts warn that holding excessive cash can be a "silent wealth killer" due to inflation eroding purchasing power, while top high-yield savings accounts currently offer up to 5.00% APY.
- The proposed "American Retirement Plus" plan would be modeled after the Thrift Savings Plan (TSP) available to federal employees, known for its low fees and investment options in index funds. - This initiative would build upon the existing "Saver's Match" program, which was established by the SECURE 2.0 Act of 2022 and is set to take effect in 2027. The Saver's Match provides a 50% government match on the first $2,000 contributed by low- to moderate-income workers to a retirement account, for a maximum of a $1,000 match. - Unlike opening a traditional IRA, eligible workers could potentially enroll in the new plan by simply checking a box on their tax returns, aiming to simplify the process and increase participation. - Currently, workers without employer-sponsored plans, such as gig and part-time workers, can save for retirement through options like SEP IRAs, SIMPLE IRAs, or Solo 401(k)s, which have their own specific contribution limits and rules. - The SECURE 2.0 Act already expanded retirement plan access for long-term part-time employees, requiring companies to allow them to participate in their 401(k) plans if they work at least 500 hours for two consecutive years. - The proposal is, in part, a response to the fact that roughly 56 million Americans lack access to an employer-sponsored retirement savings plan. - This is not the first attempt at a government-backed retirement savings program; the Obama administration introduced the "myRA" program in 2014, which was later discontinued by the Trump administration in 2017 due to high costs and low participation. - Bipartisan efforts in Congress have previously introduced similar proposals, such as the Retirement Savings for Americans Act, which also aimed to create portable retirement accounts with federal matching for workers without employer plans.
