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Newsweek
09-07-2025
- Business
- Newsweek
Americans Want Their 401(k) Plans to Change
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Americans are looking for options beyond the traditional 401(k) for funding their retirement, a new survey has found. A PlanAdviser poll conducted in May among 2,153 401(k) plan holders showed a growing concern among American workers: Their 401(k) plans may not be enough to carry them through retirement. An overwhelming 93 percent said it was important to have the option to convert their savings into guaranteed monthly income, and 67 percent said they would feel more confident about retirement if their plan included that option. The results are consistent with other research that shows the American retirement landscape is due a change. A plethora of studies and polls have found that U.S. workers are becoming increasingly concerned about their ability to see themselves financially through their post-working years. A recent study by Transamerica Center for Retirement Studies found that almost seven in 10 workers—69 percent—said they could work until retirement age and still not save enough to meet their needs. The Allianz 2025 Annual Retirement Study found that 64 percent of Americans were more scared of running out of money in retirement than they were of dying. The stress of wondering how they will fare financially later in life is fueling Americans' growing interest in guaranteed income. For many, a 401(k) account balance, even one that looks substantial, is no longer reassuring in an economy marked by volatility and inflation. A composite image created by Newsweek. A composite image created by Newsweek. Photo-illustration by Newsweek/Getty/Canva While a 401(k) allows a plan holder to invest over time and make withdrawals in retirement, it is a far cry from the defined pension plans that have dwindled over the past 40 years. Those traditionally provided steady, guaranteed income during retirement. These days, guaranteed income streams often come in the form of annuities, which are plans bought from insurance companies. "Who wouldn't feel more confident knowing they'll receive a steady check every month for the rest of their life?" Joseph Patrick Roop, the president and CEO at Belmont Capital Advisors, told Newsweek. "The fact that 93 percent of survey participants want the option to convert part of their 401(k) into guaranteed monthly income says it all." The issue, according to Roop, is largely structural. While 401(k)s give employees freedom and flexibility, they were never designed to provide lifelong income. "They give employees choices, but they also shift the burden of creating retirement income from the employer to the individual," he said. "That's precisely why employers love 401(k)s. They can contribute a match, but they're off the hook for the long-term promises of a pension." The SECURE Act and SECURE 2.0 Act, the latter of which expands automatic enrollment in retirement plans, have helped to introduce guaranteed income options into some retirement plans. However, Roop said, "very few employers have adopted them," and that broader flexibility is needed. "Allow any plan participant to roll over some or all of their 401(k) into an annuity of their choice that provides lifetime income," he continued, adding, "Just because an annuity is included in a company plan doesn't mean it's the right fit for every person in the company." Aaron Cirksena, the founder and CEO of MDRN Capital, agreed that the desire for guaranteed income is naturally rooted in worries about financial longevity. "Retirees aren't just worried about having enough money. They're worried about when that money will run out," he told Newsweek. "A guaranteed paycheck in retirement mimics the comfort of a salary." This trend isn't necessarily a rejection of the 401(k) model, but rather a realization that it has limits. "It's less about a lack of faith and more about missing pieces," Cirksena continued. "Most people don't want to ditch their 401(k), but they're realizing it's not a complete solution." Christina Muller, a licensed workplace mental health expert, suggested that this craving for security goes beyond finances, and that people naturally "crave predictability and stability, and our brains need these for psychological safety." "The 401(k) system can feel like rolling the dice with your future, adding undue financial stress for some," she told Newsweek. "People want structure and what feels like an 'insurance plan' for their hard-earned money and future." She added that Gen X, many of whom are nearing retirement after experiencing multiple economic downturns, are especially likely to prioritize safety and consistency in their planning. Almost 60 percent of Gen Z and millennials in the survey said they would be more likely to participate in their workplace retirement plan if guaranteed income options were included. "Reducing the financial and mental load for later in life will help stave off this 'invisible interest' of stress and uncertainty that compounds over time," she continued. As inflation and market instability continue to cast doubt on traditional saving strategies, demand for stable, reliable income in retirement is likely to grow. Cirksena said: "Even folks with solid savings are starting to think, 'What if this doesn't stretch as far as I thought?' That fear is driving the push for income that's stable, reliable, and protected from market swings."
The Hill
28-05-2025
- Business
- The Hill
What to know about the $1,000-per-child ‘Trump accounts'
(NEXSTAR) – Among the 1,000-plus pages of President Trump's tax bill is a proposal that would put federal money into accounts for babies born during his second term. Initially dubbed 'Money Accounts for Growth and Advancement' (MAGA), the savings proposal was recently renamed 'Trump account.' Sen. Ted Cruz (R-TX), who is credited with coming up with the idea, calls the $1,000 investments 'transformative' for future generations. 'There are many Americans who don't own stocks or bonds, are not invested in the market, and may not feel particularly invested in the American free enterprise system. This will give everyone a stake,' Cruz told Semafor. The idea itself, to give babies a financial head start when it comes to education, homeownership and financial success, is not new, however. A similar plan has been implemented in Connecticut and another proposed by Sen. Cory Booker (D-NJ). Under Trump's 'big beautiful' bill, qualifying babies born between Jan. 1, 2025 and Jan. 1, 2029 would receive $1,000 in a Trump account opened by their parents or the Treasury. To be eligible, the newborns would have to be U.S. citizens and have a Social Security number. A parent must also provide a Social Security number to show they are eligible to work, according to the bill. 'If the Secretary of Treasury determines that an eligible individual does not have an accountopened for them by the first tax return where the child is claimed as a qualifying child, theSecretary shall establish an account on the child's behalf, taking into account, to the extentpossible, the parents preferred custodian and investment fund,' the bill reads. 'Parents will be provided the option to opt out of the account.' Families would have the option to add up to $5,000 a year, with the account holder unable to take distributions before age 18. Contributions from tax-exempt entities, such as private-foundations, aren't subject to the $5,000 cap. At the age of 18, additional investments would be capped, but the named account holder would be able to access up to 50% of the money to pay for higher education, training and first-time home purchases. At age 30, account holders would have access to the full balance for any purpose. The money would be invested in a U.S. equity index fund and taxed as capital gains if spent on qualified expenses, according to retirement publication Plan Adviser. Withdrawal of the money for non-qualified purchases would be penalized and taxed as ordinary income. Michael Piwowar and Robert Shapiro, of the Milken Institute, published a paper analyzing the growth prospects of such an account and found that, on average, the $1,000 investment would grow to $8,000 after 20 years, $69,000 after 40 years and $574,000 after 60 years. A number of experts reacted favorably to the creation of the accounts, but questioned the structure. 'The MAGA accounts proposal is an encouraging step—but it misses a critical piece,' Zach Buchwald, CEO of Russell Investments, told Plan Adviser in a statement earlier this month. 'If we want true financial security, we need long-term solutions that include retirement. Let's give every young American a chance to build real wealth—not just a starter fund.' Others asked why families would put money that has already been taxed into an account that doesn't allow you to take it out tax-free, when there are options such as the 529 college savings plan, or Roth IRA that would allow them to do just that. 'The giving kids money aspect is generally good,' Zach Teutsch, a managing partner at Values Added Financial, told Yahoo Finance, but called the account structure 'ill-considered' since families who choose to fund a Trump account over a tax-advantaged 529 plan would seemingly be 'shockingly sure' their child wouldn't be going to college. Meantime, Trump accounts will only become a reality if the administration's 'big, beautiful bill' makes it through the Senate, which could involve a rewriting process in order for the package to garner 51 votes. Should the bill pass without changes to Trump accounts, financial writer Jim Wang has this advice: 'You might as well take the free $1,000 that comes with automatic enrollment of a Trump Account but there's little reason to contribute more toward the account as the child ages. For education expenses, you're better off contributing into a 529 plan.' The Associated Press contributed to this report.
