Architect of Trump’s universal 401(k) explains low-income skepticism toward retirement accounts: ‘They want to know what the catch is’

Amid increasing costs and the impending depletion of one Social Security trust fund, a secure retirement appears increasingly out of reach for numerous Americans.

The Trump administration aims to alter this situation. During Tuesday’s State of the Union address, President Donald Trump outlined a proposal to extend retirement savings accounts to the 54 million American adults lacking employer-sponsored plans. Estimates suggest a program like Trump’s could enable the poorest 25% of Americans to accumulate between $138,000 and $610,000 for retirement.

Teresa Ghilarducci, an economics professor at The New School and one of the economists who helped design Trump’s plan, stated that workers without prior retirement savings plans have long been wary of such programs for valid reasons.

“Many of the low-income earners I’ve spoken with genuinely want me to thoroughly explain how it would function for them, as they’ve been entirely shut out of such a system throughout their working lives,” Ghilarducci, who has researched retirement security for 42 years, told . “They want to understand what the hidden drawback is.”

Although the proposed accounts represent a significant move toward greater financial stability for low-income Americans, the program’s success faces hurdles.

A prior retirement initiative for lower-income workers offers a cautionary tale. In 2015, President Barack Obama introduced the MyRA program (My Retirement Account), yet eligible workers encountered obstacles, including the unexpectedly challenging step of signing up. Research indicates that automatic enrollment boosts participation in retirement plans by 50%. Despite a seemingly straightforward enrollment process—visiting a website and checking a box—the Department of Treasury closed just 30,000 new accounts after two years, deeming the program not cost-effective.

Ghilarducci argues that such distrust is justified. “For a third of workers, their money is more secure in a shoebox under the bed than in an IRA,” she said, citing monthly fees.

She noted that while she advocates for automatic enrollment for all eligible workers—a feature not included in Trump’s current proposal—the new program differs fundamentally from Obama’s. The administration will provide a matching contribution of up to $1,000 annually, offering a crucial incentive to participate.

“When systems provide a direct match for low-income people, allowing them to visibly see their savings grow in a meaningful way, participation rates increase substantially,” she said.

Is it enough money?

A survey of 1,000 registered voters revealed that, on average, people believe they need approximately $2.1 million to retire comfortably. According to data, the average 401(k) balance was $144,400 in the third quarter of 2025—less than 7% of the perceived necessary amount.

“Almost no one is close” to that figure, BlackRock CEO Larry Fink remarked in a letter to shareholders last year.

Ghilarducci, a younger Baby Boomer, stated she has witnessed how the retirement system has failed many Americans.

“I truly believed we would have a far more expansive private sector plan and larger Social Security benefits by the time I retired, but I’ve simply observed the system deteriorate,” she said. The Economic Innovation Group reports that 78.7% of full-time workers in the lowest income bracket lack access to retirement plans, compared to only 18.2% in the highest bracket.

Ghilarducci contends that low-income workers require an annual match larger than $1,000 and expressed hope that Congress will approve a more substantial match.

“This is a framework, a design, that gives them the optimal opportunity to deposit money into their accounts early in life and retain it there,” she explained. “Doing that harnesses the magic of mathematics, as compound interest essentially amplifies the workers’ own contributions.”