As a progressive economist, I wrote a paper in 2021 with a generally conservative colleague, Kevin Hassett, who now directs the National Economic Council in the Trump White House. We agreed then on the basic arithmetic of the American retirement crisis. We still do. That’s why people like him and people like me can all say: Trump’s executive order establishing TrumpIRAs, signed last month, is simply the right move for American workers.
The American retirement system is not broken for everyone. It is broken for the bottom half. A senior executive earning $500,000 contributes the maximum $23,000 to a 401(k) and receives a 6% employer match of $30,000. Because those contributions are deducted at the 37% rate, the IRS subsidizes another $8,510. In a single year, the tax code and the employer together deliver nearly $40,000 in retirement-building support for that executive. Meanwhile the restaurant worker earning $32,000 with no workplace plan gets zero.
The Urban Institute estimates more than $400 billion in annual retirement tax expenditures flows disproportionately to higher-income households. That is not a welfare state. It is a subsidy state — for people who need it least.
The human cost is not abstract. The United States has the highest elder poverty rate in the G7: 23%, according to Pensions at a Glance from the Organisation for Economic Co-operation and Development. Germany’s rate is 9%. Canada’s is 12%. The Netherlands has reduced old-age poverty to less than 3% through a universal pension paired with strong occupational plans. Americans are not uniquely unlucky. Among developed nations, Americans are uniquely unprotected.
Trump’s executive order targets the most fundamental failure in this system: access. Roughly 56 million American workers have no employer-sponsored retirement plan — no account to contribute to, no match on offer from their employers, no on-ramp to the capital markets that have built wealth for everyone else.
The order establishes a federal retirement account — TrumpIRA.gov — paired with a refundable $1,000 annual government match and automatic enrollment. That last part matters enormously. The research Hassett and I conducted found that automatic enrollment paired with a government match substantially increases participation among low- and moderate-income workers. When saving is the default and the government matches your first dollar, people save. A worker earning $40,000 who contributes $1,000 annually and receives a $1,000 match, over 40 years at a 6% real return, retires with more than $310,000 in today’s dollars. Most of that is compound growth. Getting workers into the market early is the entire intervention.
The word “refundable” is equally important. In the past, a tax benefit known as the saver’s credit was nonrefundable: Workers who owed no federal income tax received nothing from it. A cash match deposited directly into an account works regardless of tax liability. It works even for someone whose income is below the minimum for federal income tax.
This order will not resolve the retirement crisis. The Retirement Savings for Americans Act, currently before Congress, would create larger contributions and provide stronger structural support. Social Security faces a looming financing shortfall that no peripheral reform can paper over. And the details of this executive order require congressional follow-through to stick.
But the scale of what is being proposed should not be minimized. Getting 56 million workers into an account — with a real federal match, automatic enrollment and immediate effect — would be the largest expansion of retirement coverage since Social Security was created. That is not a talking point. It is arithmetic.
I have spent my career arguing that most working people who don’t have a union are left to bear market risk, longevity risk and financial risk alone. No employer beside them. No government beside them. That is not an ideological complaint. It is a factual description of a system that was designed, through decades of incremental policy choices, to reward people who already had advantages. Changing that design is long overdue.
The math doesn’t care who signs the order. And neither should the people who need this most.
Teresa Ghilarducci, a professor of economics at the New School for Social Research, is the author of “Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy.”
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