What is the new 401(k)-style retirement plan announced by Trump in State of the Union address?

President Donald Trump announced a new economic proposal for American citizens during his State of the Union address to Congress on Tuesday, unveiling a plan designed to significantly expand access to retirement savings.

The initiative aims to support millions of workers who currently lack employer-sponsored retirement plans. Under the proposal, the White House plans to offer up to $1,000 a year in matching funds, Fortune reported.

“My administration will give these forgotten American workers, great people, people that built our country, access to the same type of retirement plan offered to every federal worker,” Trump said during his address on Tuesday. “We will match your contribution with up to $1,000 each year.”

Trump delivered his second SOTU address on Tuesday shortly after expressing frustration with a Supreme Court ruling that invalidated the cornerstone of his economic agenda: The tariff regime.

What is 401(k)??

Along with his pledge to match each citizen’s retirement contribution with up to $1,000 annually, Trump said his administration would ensure that “all Americans can profit from a rising stock market,” Fox News reported.

However, the US leader did not further elaborate on where in the federal budget the proposed matched money may come from, the report said.

401(k) is a defined-contribution plan, in which a worker agrees to deposit a percentage of each paycheck directly into an investment account. Employers often match part or all of that contribution.

Employees have the option to choose specific investments held within their 401(k) accounts from a selection offered by their employer. These choices typically span a range of investment options, including stock, bond, mutual funds and target-date funds, designed to reduce the risk of losses as the employee approaches retirement.

More than 40 million American workers, including about 42% of full-time employees, do not have access to employer-sponsored retirement plans. For part-time workers, this number further rises to 79% of whom lack access to a retirement plan, according to data available on the Economic Innovation Group.

Aligning with this data, Trump pointed to what he described as a painful gap among retirees. He claimed that roughly half of all working Americans lack access to any formal retirement plan, nor do they have access to employer matching contribution programmes, Fortune reported.

Are US workers not saving enough?

Meanwhile, BlackRock’s billionaire CEO, Larry Fink, earlier warned investors in 2025 that most of them had not saved nearly enough to sustain them through retirement. The average amount that one should save for retirement is roughly $2.1 million, Fink said earlier, citing a survey. “Almost no one is close,” he was quoted as saying by Fortune.

The 401(k) plans have largely replaced traditional pension plans as a primary pillar for covering living expenses during retirement.

Trump has always remained heavily focused on this issue, often invoking 401(k) plan savings in tandem with his references to the stock market when it outperforms. He linked the expansion in retirement savings tied to the stock market to the need for more policing of Congress’ use of the stock market in his remarks.