President Donald Trump is trying out a new campaign slogan: “How’s your 401(k) doing?” The answer for more than half of Americans is that they don’t have one.
Trump has tested out the line this month at a fundraiser, a campaign rally and in a White House meeting, predicting that the rising U.S. stock market will help him win re-election. But only about 45% of private-sector workers participate in any employer-sponsored retirement plan, and the lower-income workers in Trump’s political base are the least likely to hold money in such an account, according to the Government Accountability Office.
Trump mentions the stock market almost daily in tweets or public remarks, taking direct credit for record highs by the Dow Jones Industrial Average and other indexes. But only about 14% of U.S. families directly own stocks, an asset class dominated by the country’s top earners, according to the Federal Reserve.
Meanwhile, the president has also rolled back efforts to expand retirement savings options to more middle-class and low-income workers.
For a president propelled into office in no small part by resentment that a broad swath of the country has been left behind while an entrenched establishment prospers, continual references to the stock market and 401(k) accounts risk alienating his supporters, said Austan Goolsbee, a former chairman of the White House Council of Economic Advisers under President Barack Obama.
“As a political slogan, ‘how is your 401(k) doing?’ suggests he’s most interested in the one-third of people who have a 401(k),” said Goolsbee, who teaches economics at the University of Chicago’s Booth School of Business. “The more you highlight how great that group of financial winners is doing, you at least run the risk of angering and irritating the very people who revolted against what they perceived as the financial and political elites in the first place.”
White House spokeswoman Lindsay Walters said Trump’s statements reflect “a strong economy” that is “good news for everyone.”
“For the Americans that don’t have the opportunity to invest in a 401(k) plan or who choose not to, the Trump agenda of lower taxes, higher wages, and better jobs allows them to save more on their own, and potentially have a better chance of finding a job in the future that provides those benefits,” Walters added in an emailed statement.
Unpopular Tax Plan
An October Politico/Morning Consult poll found that only a third of voters think Trump “cares about people like me.” Trump’s tax overhaul, which Congress may send to his desk this week, is opposed by a two-to-one margin because independent analyses have found it largely benefits the wealthy, according to a Quinnipiac University poll released Dec. 13.
Trump said he stumbled upon the new campaign slogan as he was preparing to speak to donors at Cipriani restaurant in New York earlier this month. Trump said that a law enforcement officer backstage at the fundraiser sparked the idea, but he didn’t identify the person by name.
“One great gentleman came up and he said, ‘Sir, I want to thank you.’ I said ‘what did I do for you?”’ Trump said on Dec. 2. “He said, ‘my 401(k) is up 40%.’ And I never thought of it. You know, I tell you, he gave me one of the great campaign lines. It’s called ‘How is your 401(k) doing?”’
Since then, Trump has tested the line at a Florida campaign rally and even asked members of the media about their own retirement accounts during a meeting in the Cabinet Room at the White House.
“And, by the way, how are your 401(k)s doing?” Trump said during a Dec. 8 rally in Pensacola, Florida, where median household income is about $46,000. “Not too bad, right?”
The line was met with light applause.
“I’m not sure he understands that only a fraction of the population has 401(k)s,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. “So he just may not realize that he’s speaking to the privileged few.”
Only a third of people contribute anything to their retirement accounts, according to a Census study released this year. Among workers in the bottom half of the income scale, less than 25% participate in a retirement program, according to the GAO.
Not Enough Money
With wages largely stagnant for most Americans in recent years, saving for retirement has been crowded out by other expenses. Student debt and auto loans are at record levels, according to Federal Reserve data released in February, and overall consumer debt is rising at the fastest pace in three years.
“You can give people all the tax-deferred accounts you want, but if they don’t have enough money it’s not going to work,” said Douglas Holtz-Eakin, president of the American Action Forum, and former chief economist to the Council of Economic Advisers under George W. Bush.
Trump’s proposed tax cuts could help some people save more money for retirement by boosting their take-home pay, Holtz-Eakin said.
During debate over the legislation, Trump blocked efforts by Republicans in Congress to scale back tax preferences for retirement savings.
“There will be NO change to your 401(k),” Trump said on Twitter on Oct. 23, after reports that lawmakers were considering drastic reductions in the amount that could be deposited tax-free in the accounts. “This has always been a great and popular middle-class tax break that works, and it stays!”
But Trump’s administration has rolled back Obama-era proposals to expand retirement savings to the millions of low- and middle-income Americans who don’t have them.
Trump signed legislation in May repealing a regulation that would have made it easier for states to automatically enroll workers in retirement programs.
In July, the Treasury Department announced it was ending the myRA program begun under Obama to provide retirement savings options to those without access to traditional 401(k) plans. Treasury said the program suffered from low demand and high costs.
“We are committed to promoting retirement savings, and, as Treasurer, I plan to devote a substantial amount of my time to ensuring more Americans have the tools and know-how to save for retirement,” U.S. Treasurer Jovita Carranza said in a July 28 statement.
The Trump administration hasn’t announced any significant effort since then to expand access to retirement savings plans.
— Check out How Tax Bill Impacts 4 Key Areas for Advisors & Clients on ThinkAdvisor.