New nudges to build a nest egg
Donald Trump is the latest president with a plan to tap bipartisan consensus on helping low-income Americans better invest in tax-deferred savings and leveling the playing field in creating financial freedom in retirement.
A delivery worker rides his bicycle in New York City during a snowstorm, Feb. 22.
Eduardo Munoz / Reuters
A rare case of consensus in Washington is that low-income workers need a nudge to put money into financial markets and build a safe nest egg beyond Social Security. Enter Donald Trump during his State of the Union speech on Tuesday. He is the latest president to find a welcome in Congress for a plan aimed at lowering barriers for individuals to invest in the economy and easily retire after a lifetime of work.
The plan鈥檚 full details are yet to come, but they reflect a centurylong trend to create an equality of opportunity for access to capital markets 鈥� with built-in guardrails for risks of loss. Such plans are based on the idea that every person has the mental worthiness to build financial worth.
Many Americans are already ahead of this latest government project. In 2024, the share of 25-year-olds with investment accounts was 37%, up sixfold from 2015. And the share of families owning publicly traded stock has nearly doubled since 1989, reaching over 60%.
Yet despite this 鈥渄emocratization鈥� in investing, as many as 42% of full-time working adults do not have access to tax-advantaged savings accounts, such as 401(k)s offered by most big employers. For part-time workers, the number is 79%. The Trump plan, like those under Presidents Joe Biden and Barack Obama as well as in a bipartisan bill in Congress, would offer new incentives for such workers to set aside earnings for retirement.
The president鈥檚 proposal is based on the existing retirement program for federal employees. It would offer up to $1,000 in annual government matching to a self-directed retirement account as a way to end what Mr. Trump calls a 鈥済ross disparity鈥� in access to tax-free savings.
Just how the plan would affect 401(k) accounts, as well as efforts in many states to help low-income workers gain access to retirement plans, remains to be worked out. But Washington now has political momentum to enable financial sovereignty for all individuals in preparing for retirement.
The United States has made progress in equality on many fronts 鈥� gender, race, religion, and disabilities. To take liberties with one of Martin Luther King Jr.鈥檚 famous quotes: The arc toward financial freedom in one鈥檚 golden years is long, but it bends toward equal opportunity.