Trump Promises Up to $1,000 Match With New 401(k) Option - Here's What You Need to Know

In President Trump's February State of the Union address, he announced that his administration will launch a new type of 401(k) retirement plan specifically aimed at workers who do not have access to one through their jobs. The goal, President Trump said, was for every American to be able to take advantage of a rising stock market.

Here's what we know so far about these plans, what they are modeled after, when we will learn more, and some critiques of this policy from experts.

Trump's new 401(k) proposal aims to help left-behind employees

According to the Pew Charitable Trust, 56 million workers, over half of the American workforce, do not have 401(k) plans. Although these workers likely have access to Social Security, it will not be enough to provide a living wage in retirement.

Ideally, workers will need a combination of retirement plans and income streams to support their retirement. That's why President Trump is proposing these new 401(k) plans to ensure that workers have equal access to a secure retirement.

Many lower-income and minority workers lack 401(k) access

Populations that typically lack access to 401(k)s include those who work for small businesses. In fact, 78% of firms with under 10 employees do not offer 401(k) plans. 

Minority workers, low-income workers, and those who work part-time are more likely to lack access to 401(k) plans. Donald Trump's new 401(k) plan aims to provide these underrepresented groups with an opportunity to save and invest in a tax-advantaged retirement account.

The new 401(k) plan will be modeled after TSP plans

Thrift Savings Plans (TSP) are the retirement plans available to federal workers. These plans are known for having low cost and access to high-quality, affordable funds.

According to White House representatives, these new plans will be similar to TSP plans, so workers can expect to be able to purchase low-cost index funds.

Unique features that set these 401(k)s apart

One of the positive features of President Trump's proposed 401(k) plans is that they are portable. What that means is that these 401(k) plans are tied to the worker, not the employer. 

It may seem hard to believe, but there is approximately $2 trillion of lost or forgotten 401(k) funds in the United States. That's because some workers get laid off or switch jobs without rolling over their retirement accounts. Many of these workers don't know how to access their old plans. That's why having a feature that lets the 401(k) be portable to new jobs is helpful.

Another reported feature is that other people may make charitable contributions to these 401(k)s. So, if a philanthropist wants to help boost someone's retirement savings, they will be able to do that.

Is the Saver's Match Program the same thing?

In 2022, President Biden signed the SECURE 2.0 Act, which includes several changes to 401(k) plans. For example, it included a policy requiring employers to enroll workers in 401(k) plans automatically. It also created the Saver's Match Program, which will take effect in 2027. This program is not the same as President Trump's 401(k) plan.

However, it is similar in that it calls for a federal matching contribution for low- to moderate-income retirement savers. Some critics of Trump's plan say that he is simply repackaging President Biden's plan.

Some have critiques and concerns about the proposed plan

In addition to accusations that President Trump is simply repackaging President Biden's plan, other critics say that many workers will not be able to allocate extra money to 401(k) contributions to take advantage of the match. That's because most workers without 401(k) plans are low-income employees or minorities who are disproportionately affected by limited access to 401(k) plans.

However, the average income among these workers is under $53,000 per year. Given the rising cost of living, some critics argue that even if workers had access to these plans, they would be unable to contribute due to higher expenses and low incomes.

How to stay up to date on the proposed 401(k) plan

To stay informed about President Trump's new 401(k) plan, follow the Trump administration's rules and retirement plan news. 

You can also speak with a financial planner or an accountant, who will likely be up-to-date on any retirement policy changes so that they can inform their clients.

Bottom line

The goal of this new 401(k) plan is to provide greater access to retirement savings for people who do not currently have a plan. This proposal does not yet exist as law, but hopefully Americans will have more information soon about whether they qualify for it.

Until then, workers without 401(k) plans could consider other options, such as opening an IRA. Ultimately, the goal is to help workers achieve a stress-free retirement, and if this plan comes to fruition, it will provide another pathway toward that goal.

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