This article first appeared as an op-ed in The Washington Post, on April 22, 2026. Read it here.
President Donald Trump has a new retirement savings proposal that enjoys the support of an unlikely coalition of progressives, conservatives and Wall Street firms, all in favor of expanding government-backed retirement savings accounts.
That this proposal has the backing of commercial and political interests is not a point in its favor. Rather, it’s a classic case of “bootleggers and Baptists” joining forces to push bad policy.
The president offered the outlines of a plan during his State of the Union address in February. The details remain in flux, but support is building for creating new after-tax savings accounts for working Americans who do not have an employer-sponsored retirement plan. If the accounts are modeled on a bipartisan proposal in Congress, those who earn less than the national median income would be automatically enrolled in the plans and would receive matching funds from the government.
An estimated 63 million workers — 39 percent of the U.S. workforce — would qualify for the accounts, with roughly 42 million eligible for matching funds.
For financial firms — the bootleggers in this story — these accounts are a business opportunity that gives them millions of new, automatically enrolled customers, aided by government funding. BlackRock CEO Larry Fink has urged policymakers to consider creating private investment accounts that exist alongside Social Security. These would be similar to Australia’s superannuation system, which relies on compulsory worker contributions that are invested in markets. The idea has appealed to Treasury Secretary Scott Bessent, who sees such accounts as a possible vehicle to create a national sovereign wealth fund desired by Trump.
Conservatives and progressives — the Baptists — have their own reasons to support the idea. Progressives see an opportunity for greater government involvement in retirement saving, especially as the limited subsidies provided at the outset will likely to grow over time. Conservatives, meanwhile, are likely to see these accounts as a way to privatize or replace Social Security.
But there’s a major problem with this effort. It does little to solve the primary threat to a secure retirement: Social Security’s deteriorating finances. With roughly $28 trillion in projected long-term shortfalls, benefits could be cut by as much as 28 percent annually starting in 2032, hurting the poorest seniors the most. Instead of addressing that imbalance, lawmakers are considering new spending commitments with uncertain benefits and significant costs.
Starting in 2027, low-income workers with existing retirement accounts are set to receive up to $1,000 in matching funds, at a cost to federal taxpayers of $9.3 billion through 2032. Expanding eligibility and automatically enrolling workers without existing accounts, as proposed by the bipartisan Retirement Savings for Americans Act, would be far more costly. Some projections put the price tag at $285 billion over the first decade alone.
The proposed accounts also ignore the data on how people save for retirement. Low-income workers who live paycheck to paycheck cannot afford to lock funds away for decades.
Automatically enrolling lower-income workers in a retirement fund can create more problems than it solves. They are more likely to offset default retirement contributions by taking on debt or withdrawing money early and paying tax penalties. According to Vanguard, 6 percent of workers took hardship withdrawals from the 401(k) plans it administered last year. Households at the lowest income level have the highest early withdrawal rates, with penalties accounting for 43 percent of all taxes paid by individuals with adjusted gross incomes below $5,000.
If policymakers want to help those Trump called “often forgotten American workers” when he announced his proposal, they should focus on simplicity and flexibility. Tax-advantaged universal savings accounts, without withdrawal restrictions or government matching, would do much more to help these families. And all without increasing federal spending.
At the same time, if legislators are so eager to help people secure their retirement, they could instead focus on fixing Social Security and keeping that 28 percent benefit cut from happening. Otherwise, seniors who rely on the program as their primary source of retirement income will be hurt the most.
Great post; my fear is that the private sector will simply stop offering 401(k) and related matched-savings programs, since the government would now be engaged in that activity, thereby exploding its costs to taxpayers. What's next, a federal takeover of private pension plans, as progressives have proposed for years?