On April 30, President Donald Trump signed an executive order aimed at addressing the retirement savings deficit among lower-income American workers. The order directs the Secretary of the Treasury to create a federal website to help workers with no access to an employer retirement plan select quality, low-cost IRA accounts offered by private-sector financial institutions.
The website, called (wait for it) TrumpIRA.gov, is the first step in implementing an important retirement initiative passed under the previous administration that will provide direct federal matching deposits of up to $1,000 per year to lower-income individuals who contribute to their own retirement. The site is scheduled to be operational by Jan. 1 and has the potential to help millions of Americans improve their prospects for a more secure retirement.
In 2022, President Joe Biden signed the Secure 2.0 Act, a bipartisan piece of legislation that included several incentives to boost retirement savings. One of those incentives was a direct subsidy to low- and middle-income earners called the saver’s match that directs the federal government to match a portion of a worker’s own retirement savings in an employer plan or an IRA account, subject to certain eligibility requirements and income thresholds, beginning in 2027.
The new incentive is intended to replace an existing tax subsidy known as the saver’s credit, created in 2001. While well-intentioned, the design of this tax credit doomed it to failure from the start. It is a nonrefundable credit of up to $1,000 that must be claimed on a worker’s tax return, not a direct payment. Since it applies only to lower-income households that typically pay little or no tax, the credit is often worthless as it cannot exceed total tax liability.
If you are not aware of its existence, you understand another major drawback. Surveys like a recent one from the Transamerica Institute consistently find that fewer than half of those eligible for the credit are even aware of its existence, and IRS data shows that less than 6% take advantage, receiving an average credit of $191.