Strange Bedfellows

 It’s been said that politics makes strange bedfellows — but it doesn’t get much stranger than President Trump and Teresa Ghilarducci.

At least temporarily, they appear aligned on one of retirement policy’s most persistent challenges: how to reach workers who don’t have access to a retirement plan at work.

President Trump’s April 30 executive order directs Treasury to develop a federal IRA savings framework aimed at uncovered workers — contract workers, part-timers, the self-employed, and employees of small businesses. And while the proposal is still light on details, it has drawn enthusiastic support from one of the nation’s most consistent critics of the employer-based retirement system: Professor Teresa Ghilarducci.

The Trump initiative — hinted at in the State of the Union address — would synchronize with the expanded Saver’s Match included in the SECURE 2.0 Act of 2022. The Saver’s Match is one of the more consequential — if still underappreciated — changes in that legislation. The Saver’s Match replaces an often-invisible tax credit with something workers can actually see: a direct federal contribution into a retirement account. In practical terms, it turns a tax benefit into something that feels a lot like an employer match — except funded by the federal government and targeted at lower-income workers.[i]

ad space

That said, Ghilarducci’s full-throated support of the proposal doesn’t seem based on the Saver’s Match synchronization, but rather on its outreach to those without access to a retirement plan at work. And while — like the state-run plans for private sector workers — it seems likely to help close that coverage gap — Ghilarducci is quick to acknowledge that it shares some elements of a proposal that she and her latest conservative-leaning “partner,” Kevin Hassett, who these days directs the National Economic Council in the Trump White House have drafted. That proposal, embodied in the Retirement Savings for Americans Act, also seeks to extend coverage, notably for workers who currently lack access to a retirement plan at work.[ii]

Now, lest one be inclined to think that Professor Ghilarducci has reconsidered her long-standing and well-documented cynicism regarding the employer-sponsored system, her recent commentary continues to refer to it as “broken,” “failed,” and a “retirement wealth inequality machine.” While Ghilarducci has occasionally insisted she doesn’t want to “blow up” the 401(k) system, her preference for direct federal involvement over employer sponsorship remains fairly unmistakable.

Ironically, however, the workers most likely to benefit early on may be those who already participate in workplace retirement plans. The infrastructure is already there — payroll deduction, participant communication, automatic savings mechanisms, and recordkeepers eager to facilitate the flow of matching contributions.

Still, since the details of the new Trump proposal, much less its implementation aren’t yet known, it might turn out differently. And — as with many of the provisions in SECURE 2.0 —employers are not required to accept Saver’s Match contributions, though many are expected to, particularly larger programs.

In the end, this may be less an ideological convergence than a practical one. Trump sees an opportunity to expand savings access without creating a new entitlement structure. Ghilarducci sees a step away from reliance on employer-sponsored retirement programs. Both see political and policy value in federal matching dollars tied to individual savings.

ad space

Strange bedfellows, indeed.

• Nevin E. Adams, JD

 

---

[i] Eligibility is aimed squarely at lower- and moderate-income workers. To qualify, an individual must be at least 18, cannot be claimed as a dependent, and cannot be a full-time student. The key gating factor, however, is income. The match is available in full for those below certain modified adjusted gross income thresholds — roughly $20,500 for single filers, $30,750 for heads of household, and $41,000 for married couples filing jointly — and then phases out until it disappears entirely at about $35,500, $53,250, and $71,000, respectively.

[ii] However, see The Results Are In! Most Workers Would Be Worse Off Under RSAA.

A Retirement 'Journey'

  Mother’s Day tends to come packaged in the usual ways — cards, flowers, reservations, and a few familiar phrases about gratitude. There’s nothing wrong with any of that. But it also flattens something that, in real life, is anything but simple: the steady, unglamorous work that holds everything together long before anyone thinks to acknowledge it.

A recent driving trip out West brought that into sharper focus for me.

Now, my wife and I had been talking about making this particular trip for years. We had specific things we wanted to see, and a rough idea of their proximity to each other. And, thanks to a speaking engagement, we had a departure date, and a “jumping off” point. 

Now, on paper, a road trip sounds straightforward enough — pack the car, set the route, go.

In practice — and especially when you’re traveling with two dogs who are very much part of the family structure (and not very accustomed to travelling), it becomes something closer to project management. Timing, supplies, stops, accommodations, contingencies. It’s not complicated in any single step, but it is relentless in its accumulation.

And almost none of it is visible in the moment you actually leave the driveway. But heaven help you if you haven’t given it (all) consideration before you do.

ad space

As it turned out, what struck me most on that road trip wasn’t the driving itself, or even the destination(s) — though there was plenty to consider on both fronts. Rather, it was everything that had to happen beforehand for the trip to feel effortless once it began. The coordination around our four-legged “children” — what they would need, where they would be allowed (national parks, btw, have gotten very particular about such things), how much of their special diets would need to be accommodated, how the days would (have to) be structured around them — wasn’t an “add-on” to the trip. It was the trip. It just wasn’t the part anyone sees. 

Well, except for my wife — and the pups — whose experience would have been significantly less enjoyable had it all been left to me.[i] And that’s the part that sticks with me. Every successful trip has someone accounting for the details no one else wants to think about. 

Retirement has been described by some as a journey — one that requires thoughtful preparation ahead of time — one that needs to consider contingencies, and one that sometimes takes longer than contemplated in those preparations. 

And yet, when it comes to retirement, a surprising number of people still pull out of the driveway without much more than a vague destination and a hopeful estimate of how far a tank will take them. Surveys consistently show that “retirement needs” are often little more than guesses — revised up or down depending on what the market did last quarter.

So, yes — at a high level my wife and I planned the trip together — we plotted our route, booked hotels, and packed our respective suitcases. But the details of the trip itself —  snacks for the car, medications that we’d perhaps need, coffee, and the various accouterments that our pups required — well, those details, and they were absolutely essential to a successful trip — fell to my better half. 

Now my wife has been doing these mental travel preparations for decades. So much so in fact that I have largely taken them for granted. But this was a longer trip than our usual undertakings — which complicated both the type and volume of packings. And while some of it surely is just “routine” at this point, the longer the trip went on, the more amazed I was at the preparations — and contingencies — she had already considered.

ad space

Retirement planning isn’t just about having a destination — it’s about making sure someone is responsible for thinking about things that can go wrong along the way.

So, as you think about your retirement road trip — perhaps focused on the finances, market volatility and the like — who’s taking into account all those inevitable bumps in the road, the potential road closures, the unplanned interruptions that impact your anticipated arrival times?

And if the answer is “no one,” I’d suggest you rectify that before you get on the road. Because, much like the work, we tend to notice only once a year on Mother’s Day, the things that make the journey work are usually the things no one thinks to celebrate — until they’re missing.

• Nevin E. Adams, JD

 

---

[i] Trust me, I thought travelling with three kids was…challenging.

Retirement Realities Better Than Pre-Retirement Perspectives

 If you read only the headlines from the latest Employee Benefit Research Institute Retirement Confidence Survey, the takeaway feels familiar: confidence is slipping, worries are rising, and concern about retirement readiness is once again in focus.

Seriously?

Look, once you move past the year-over-year decline[i] and look at the levels themselves, the picture changes shape. Yes, confidence is down from recent highs. But retirees, in particular, remain broadly confident in their ability to live comfortably in retirement despite all the “noise” about inflation, Social Security, and volatile markets. Roughly three-quarters still say they feel secure about their financial footing in retirement. That is not a fragile number. It is a resilient one.

ad space

What stands out even more is how consistently the survey shows a gap between expectations and actual experience. Workers — still on the near side of retirement — are meaningfully less confident than those already in it. That pattern shows up again in the latest Retirement Confidence Survey, and it is one of the most important, if underappreciated, dynamics in the data. And why not? The drumbeat of bad economic news, unrealistic financial expectations, dramatically inflated lump-sum healthcare costs, and yes — lack of confidence — are incessant, even in this “longest-running survey of its kind.”

Considering the headline prisms journalists — and industry surveyors — routinely put in front of people, what else could you expect?

But — and as a current retiree — let me just affirm what the RCS is (still) telling us: retirement looks more uncertain when you are looking at it than when you are living it.

ad space

That asymmetry is not surprising, but it is revealing. Before retirement, the risks are abstract and cumulative — markets, inflation, healthcare costs, longevity. They tend to stack in the imagination. After retirement, those same risks become real, but also more bounded. Income sources are visible. Tradeoffs are immediate. Decisions replace speculation.

The result is often not a dramatic sense of abundance, but something more important: manageability.

That does not mean retirees are carefree, or that pressures like inflation are irrelevant. The modest decline in confidence this year almost certainly reflects real household strain — and what I (still) consider to be a valid concern that lawmakers will fumble the Social Security (and Medicare) foundation. But it is still a decline within a relatively high band —movement from strong confidence to slightly less strong confidence, not from confidence to doubt. A slight dip, not a crash.

Let’s face it — the most overlooked (and certainly unreported) signal in the data: those actually in retirement are still, by and large, saying it works.

ad space

Not perfectly. Not uniformly. But sufficiently — and more consistently than the pre-retiree mindset — or the headlines that fuel it — would suggest.

That gap between perception and experience is not closing. If anything, it remains one of the most durable features of retirement confidence research. And it carries an important implication: the further people are from retirement, the more uncertain it tends to feel. The closer they get — or the more they experience it — the more workable it often becomes.

Unfortunately, that is not a headline story — and it’s never going to get “clicks.” But it may be the real one worth paying attention to. 

ad space

And maybe, just maybe, it’s one YOU should share.

• Nevin E. Adams, JD

 

---

[i] Typical headlines included Retirement Confidence Among Workers, Retirees Slips to Lowest Point in Nearly a Decade, Retirement Confidence Falls as Social Security Concerns Mount, Workers' Retirement Confidence Hits 9-Year Low: EBRI, Americans Are Losing Confidence in Having Enough for Retirement, Survey Says - WSJ, Workers’ and retirees’ confidence for a comfortable retirement continues to decline amid fears of changing government programs - Pensions & Investments,