The Bold Move That Would Give Americans the Retirement Security They Crave

Reprinted with permission by Barron's

February 5, 2025, 8:01 a.m. EST

Most Americans believe that they are becoming worse off financially. This worry is typically reported as a measure of “sentiment,” but there are facts as well as feelings behind it. Big-ticket items such as housing, higher education, and child-care are, in fact, much more expensive today. The system is getting harder for rising generations, and the hardest change is still yet to come.

The long-term decline of the corporate pension (which provides lifetime income) in favor of the 401(k) (which is really just a pot of savings) will be the straw that breaks the camel's back. The weakening of pensions as a source of stability later in life has been gradual, but its full impact will hit our economy as the 401(k) generation begins to retire this year. This cohort of workers will be the first to rely entirely on self-funded accounts, and the vast majority don't have nearly enough saved. The inevitable result will be a wave of elderly people with years left to live, but who run out of money.

Stable retirement should be central to American exceptionalism—the belief that hard work leads to comfortable golden years. But for decades, our retirement system has been a blind spot. Too many Americans  rely on Social Security, which was never designed to be a comprehensive solution. It was designed as a safety net when the average American life expectancy at birth was under 65.

Our approach today assumes that most workers have access to good workplace retirement plans (they don't) and that they'll start saving early (they really don't). By the time most Americans begin meaningful retirement contributions, the crucial years for compound growth have vanished.

Here's where President Donald Trump can deliver meaningful change. Working families voted for financial stability, and Trump in turn put economic security at the center of his agenda. One of the most direct ways he can restore the American dream is by improving our retirement outcomes.

My proposal is that we create a national retirement savings program. It would combine the best features of existing plans, like the tax-free investment gains of a Roth IRA and the ultra-low-fee investment options in corporate 401(k)s. What's most important is that we provide it to everyone. At the start, we would create accounts for all young Americans and kick-start them with a $1,000 initial investment for every new high school graduate. The initial contribution would be restricted from early withdrawal (it's not a handout) and will bring with it tax incentives for people to make their own contributions. Even with modest personal contributions, accounts could compound to half a million dollars by retirement. These plans would help bridge the gap with other savings vehicles such as Social Security to create substantial, tax-advantaged nest eggs.

The beauty here is that it is simple and efficient. And the government's commitment would be shockingly inexpensive. With 3.7 million annual high school graduates, the cost would be less than $5 billion annually, a fraction of most government programs (Social Security for context is $1.3 trillion.) The vast majority of funding over time will come from the individuals themselves, driven by the power of market returns. In this way, national retirement accounts would represent a new model for government programs—one that is less reliant on entitlement and more focused on self-sufficiency and private-sector partnership. It would also provide consistent flows into the markets, and could be directed to support U.S.-based companies.

There is a lot of precedent. Australia and other countries have mandatory retirement-investing programs that begin as soon as you start work. In the U.S., a few states have created the framework for universal plan access. (Washington state, where I live, is completing a universal retirement plan for all uncovered workers across the state.) But these programs tend to lack the individual incentives needed for long-term success.

Our solution would work on both an individual and a systemic level. Savers would have the incentives and framework to create a substantial nest egg over time. We would demystify investing so new graduates could learn sound financial habits. And while young people are building their financial stability, they would put their money to work in the markets and help drive economic growth.

This is a bold move that would make meaningful progress on the biggest problem coming for the next generation, and it wouldn't cost a lot of money. And it speaks directly to what voters want from President Trump: meaningful action that will enhance their financial futures.

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