As costs continue to climb, and with one of the two Social Security trust funds expected to run out by 2032, many Americans are finding it tough to envision a secure retirement.
The Trump administration aims to address this issue. In his State of the Union address on Tuesday, President Trump unveiled a proposal to create retirement savings accounts for the 54 million American adults lacking employer-supported retirement plans. According to economists, such a plan could allow the lowest 25% of earners to save anywhere from $138,000 to $610,000 for retirement.
Yet, there’s a long-standing skepticism amongst workers who’ve never had access to savings plans. This hesitance is well-founded, noted Teresa Ghilarducci, a professor of economics at New School and one of the architects of Trump’s initiative. “Many low-income individuals I spoke to were eager for a detailed explanation of how it would benefit them. They often feel sidelined by these programs during their careers,” Ghilarducci remarked, having spent over four decades studying retirement security.
This proposed legislation represents a significant advancement for low-income earners, but hurdles remain. For instance, the legacy of retirement solutions for low-wage workers can be discouraging. Back in 2015, President Obama rolled out the MyRA retirement account initiative, but many eligible individuals faced challenges, particularly with the often cumbersome registration process. A study indicated that automatic enrollment can boost participation in retirement plans by as much as 50%, yet even the straightforward act of ticking a box on a website proved too daunting, leading to only 30,000 new accounts after two years.
Ghilarducci empathizes with the skepticism. “For many workers, it’s safer to stash their savings under a mattress than to invest in a retirement account,” she said.
On another note, Ghilarducci emphasized that all eligible workers should automatically be enrolled, a feature that’s missing in President Trump’s proposal. Nonetheless, she argued that the new program is fundamentally different from Obama’s. It reportedly aims to save individuals up to $1,000 annually while offering incentives for participation.
“If we could create a system where low-income individuals receive a matched contribution and see their savings grow significantly, it would likely improve enrollment dramatically,” she suggested.
Is there enough money?
A survey by BlackRock revealed that people believe they need around $2.1 million for a comfortable retirement. In comparison, as of the third quarter of 2025, the average 401(k) balance was only $144,400, according to Fidelity Investments, amounting to less than 7% of what many believe they need.
BlackRock’s CEO Larry Fink stated, “virtually no one has reached that target amount,” as mentioned in his letter to shareholders from last year.
Ghilarducci, a young baby boomer, reflects on how the retirement system has let many down. “I honestly thought that by the time I reached retirement age, there would be more robust private sector plans and larger Social Security benefits. But instead, I’ve watched the situation deteriorate,” she noted. Statistics show that 78.7% of full-time workers in the lowest income decile lack access to retirement plans, compared to just 18.2% of those in the highest income bracket.
She believes that low-income workers deserve more than just $1,000 a year and hopes Congress will increase incentives further. “This initiative aims to create a structure that maximizes their chances of accumulating savings early on and maintaining it for the future. By doing so, we can leverage the power of compound interest,” she explained.
