Trump's new executive order, with help from Congress, could increase U.S. retirement wealth up to 77%, researchers find
Researchers at Morningstar analyzed a proposed enhancement of Trump's executive order on retirement savings, finding that automatic enrollment and expanded incentives could significantly boost retirement wealth. Under an optimized scenario combining multiple policy changes, U.S. retirement wealth could increase by up to 77%, especially benefiting lower-income individuals. Consistent, long-term savings behavior remains the most critical factor in growing retirement funds, according to the study's authors.
- ▪Morningstar estimates 32.3 million new savers would join retirement plans under a base scenario with auto-enrollment at a 3% savings rate.
- ▪Automatic enrollment is identified as the most impactful factor, significantly increasing participation compared to voluntary enrollment.
- ▪Enhancing the Saver's Match, raising income caps, escalating contribution rates, and restricting early withdrawals could together increase retirement wealth by 77%.
- ▪Workers with 10 or more years in auto-enrollment plans could see 67% to 125% higher retirement wealth.
- ▪Consistent savings over time is the primary determinant of retirement wealth growth, according to Morningstar's research.
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Researchers at Morningstar took aspects of both plans into account when measuring the possible effectiveness of an enhanced version of Trump's order, says Spencer Look, associate director of retirement studies at Morningstar retirement and one of the study's co-authors. They arrived at a "base case" for their simulation, which included auto-enrollment into retirement plans at a 3% savings rate. Under that scenario, Morningstar estimates 32.3 million new savers would enter the system and retirement wealth would increase by 28% overall.The big difference-maker in all of Morningstar's simulations, Look says, is automatic enrollment.
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