Trump’s universal 401(k) designer explains why those with lower incomes are skeptical of retirement plans: ‘they’re curious about the hidden drawbacks’

Retirement Security in Jeopardy for Many Americans

As living costs continue to climb and one of the Social Security trust funds is projected to be depleted by 2032, the prospect of a secure retirement is slipping further away for countless Americans. Recent reports suggest that a comfortable retirement is increasingly unattainable for the majority.

New Federal Initiative to Expand Retirement Savings

In response to these challenges, the Trump administration has introduced a proposal aimed at providing retirement savings accounts to the 54 million adults in the U.S. who currently lack access to employer-sponsored retirement plans. During the State of the Union address, President Trump outlined this initiative, which economists estimate could enable the lowest-earning 25% of Americans to accumulate between $138,000 and $610,000 for retirement.

Lingering Skepticism Among Workers

Despite the promise of these new accounts, skepticism remains high among workers who have never had access to retirement savings plans. Teresa Ghilarducci, an economics professor at The New School and a key contributor to the plan, notes that many low-income earners are wary and seek clear explanations, having been excluded from such systems throughout their careers.

“Many of the people I speak with want a detailed breakdown of how the program would benefit them, as they have never been part of a system like this,” Ghilarducci, who has spent over four decades studying retirement security, told Fortune. “They’re eager to understand if there’s a hidden downside.”

Barriers to Success

While the proposed accounts represent a significant move toward greater financial stability for lower-income Americans, several hurdles remain. Past efforts, such as President Obama’s MyRA program launched in 2015, faced obstacles like complicated enrollment processes. Research shows that automatic enrollment can boost participation in retirement plans by 50%. However, despite a relatively simple sign-up process, the Treasury Department closed 30,000 MyRA accounts after two years, citing inefficiency and high costs.

Ghilarducci emphasizes that such distrust is understandable. “For about a third of workers, keeping their savings in cash at home may be safer than using an IRA, due to monthly fees,” she explains.

Key Differences in the New Proposal

Although Ghilarducci advocates for automatic enrollment for all eligible workers—a feature not currently included in Trump’s plan—she highlights a crucial distinction: the new program offers a government match of up to $1,000 per year, providing a strong incentive for participation.

“When low-income individuals receive a direct match and can visibly watch their savings grow, participation rates increase dramatically,” she says.

Are the Savings Sufficient?

According to a survey of 1,000 voters, Americans believe they need an average of $2.1 million to retire comfortably. Yet, as of the third quarter of 2025, the typical 401(k) balance stood at just $144,400—less than 7% of the perceived requirement, according to Fidelity Investments.

“Almost no one is close” to reaching that goal, BlackRock CEO Larry Fink wrote in a letter to shareholders.

Systemic Challenges Remain

Ghilarducci, herself a member of the Baby Boomer generation, has witnessed firsthand the shortcomings of the retirement system. “I truly believed we’d see more robust private sector plans and higher Social Security benefits by the time I retired, but the system has only deteriorated,” she reflects. Data from the Economic Innovation Group shows that 78.7% of full-time workers in the lowest income bracket lack access to retirement plans, compared to just 18.2% among the highest earners.

She argues that a $1,000 annual match may not be enough for low-income workers and hopes Congress will consider increasing the matching contribution.

“This structure gives workers the best opportunity to start saving early and leave their money untouched, allowing compound interest to significantly boost their savings over time,” Ghilarducci explains.

This article was originally published on Fortune.com.