Policy Experts See Trump Accounts as Future Hub for Rollovers
Trump accounts are set to launch in July, having only been passed into law last year. However, many policy experts are already speculating on how they could be further integrated into the retirement system, such as using them to assist in account consolidation and to increase uptake of the Saver’s Match.
By Paul Mulholland | Originally posted on PSCA
Trump accounts are set to launch in July, having only been passed into law last year. However, many policy experts are already speculating on how they could be further integrated into the retirement system, such as using them to assist in account consolidation and to increase uptake of the Saver’s Match.
Kendra Isaacson, a principal at Mindset, explains that Trump accounts have “a lot of potential” within the broader retirement ecosystem.
The potential of Trump accounts could be fully realized if they were subject to automatic enrollment, which according to the IRS may be impossible under current law. But the law can be changed, Isaacson observes, and this could lead to “everyone having a retirement account.”
If children were automatically enrolled in Trump accounts, then virtually everyone would at least have a traditional IRA, which Trump accounts convert into at age 18. This can help gig workers save and can also assist in account consolidation by giving a parking spot for various rollovers over a worker’s career, Isaacson explains.
Account Consolidation
KC Boas, the retirement savings initiative lead at the Aspen Institute, says that “one of the possibilities that stood out to us the most for lifelong saving and investing,” was account consolidation. Since people change jobs frequently, but Trump accounts follow the person, this “makes them a natural landing spot” for rollovers, especially involuntary rollovers.
Ray Boshara, a senior policy advisor at Washington University in St. Louis, adds that automatic enrollment is probably necessary for Trump accounts to fulfill this function and “for the benefits of Trump accounts to be fully realized.”
Joel Dickson, the global head of advised strategies at Vanguard, adds that Trump accounts offer an interesting possibility to address the “small pots problem,” referring to the fact that many savers have several small accounts that they struggle to consolidate. This sets up an opportunity for a “one account to rule them all scenario.”