In his State of Union address, President Trump said he’d propose expanding an existing federal government contribution to retirement savings plans. But what would that really mean?

While the White House offered no details, Trump said this, “I’m announcing that next year my administration will give these oft-forgotten American workers, great people, the people that built our country, access to the same type of retirement plan offered to every federal worker. We will match your contribution with up to $1,000 each year.”

Not New

Trump’s idea is not new and in some respects is less generous than current law. It would build on a 2022 measure known as the SECURE Act 2.0 that created a maximum $2,000 federal payment to low- and moderate-income savers, starting in 2027.

The vast majority of those without retirement plans at work earn low incomes. Because the SECURE Act already will provide a government match for single people making up to $35,500 and couples earning as much as $71,000, for many there will be less to the president’s plan than meets the eye.

Still, Trump would fill some gaps for higher-income people who do not have sufficient savings for old age. In effect, he’d provide a less generous match but for more people. A bipartisan bill to expand  SECURE 2.0, but more substantial than Trump’s idea, already is pending in Congress.

Trump’s latest proposal seems to be something of a discounted substitute for an earlier promise to send “rebate” or “dividend” checks of $2,000 to nearly all Americans. Trump did not mention that payment, which he had said would be funded with tariff revenue, in his State of the Union speech.

Rather, he pivoted to more government funding of retirement savings, an idea that likely would be substantially less costly, at least in the short term.

Like The Plan For Federal Workers

Trump said he wants to pattern his payments on the federal Thrift Savings Plan. It works this way: As an employer, the government automatically contributes 1% of salary to a federal worker’s retirement account each year. Then, if a worker contributes at least 5% of pay, the government will match the first 3% dollar-for-dollar and the next 2% at 50 cents on the dollar.

So, imagine you make $50,000 annually. Under the federal TSP system, the government automatically contributes 1%, or $500. For those workers who put away 5% of their wages, $2,500 in this example, the feds would match an additional 3% of $50,000 or $1,500, plus half of 2% of $50,000 or $500, for a total of employer contribution of $2,500.

Trump’s less generous plan would cap the maximum match at $1,000.

Making Private Savings A Priority

Presumably, Trump’s payments would be available only to those without workplace retirement plans. Currently, about half of workers have no access to such employer plans. Many are low-income, part-timers, or gig workers. Only about 20 percent of firms with 10 employees or fewer offer plans, according to a 2024 report by David John at AARP.

Increasing private savings has been a goal of the Administration. In last summer’s big budget bill, Congress created a $1,000 contribution to savings accounts for children born from 2025 through 2028, which came to be called Trump Accounts. They are being paid for in part by businesses and wealthy individuals with close connections to Trump. Some firms promise to supplement the accounts for their own employees.

At the same time, several states have been pursuing their own ideas to boost retirement savings. About 20 have or are creating so-called “work and save” or auto-IRA programs. These allow employees at firms without retirement savings plans to save through state-operated programs.

Participants generally put the funds in Roth-style plans. Workers are automatically enrolled unless they opt out. About 1 million people currently participate.  However, unlike the Trump plan, states make no contribution to the accounts.

Many Questions

Trump cannot create his proposed federal match unilaterally. It would require legislation and it is unclear whether Congress would even consider such a plan this year. Treasury Secretary Scott Bessent says Congress could approve the measure through special rules known as reconciliation, which requires only majority support in the Senate (most bills require 60 votes and the Senate currently has 53 Republicans). But many GOP congressional leaders seem skeptical they could find enough support for such a process.

Trump’s idea leaves many questions unanswered. How would someone qualify? Would they be only for working people? Would self-employed individuals be eligible? How would income from the accounts be taxed? Would the funds have to be used only for retirement or could they be withdrawn for other purposes? Would workers be auto-enrolled as in the state programs? What is the projected cost?

Auto-enrollment is a key issue. Many experts believe that feature will do more to encourage savings than a modest government match.

Encouraging more Americas to save for retirement is an important goal. Whether Trump’s idea will help many achieve that aim will depend on details we have not yet seen.