Why Auto-IRA Programs Could Be Retirement Game Changers

Blurred office workers cross a busy street in New York City. — A multiracial group of three workers conversing as they walk through a steel fabrication factory. The mature Hispanic man in the middle, is talking and holding a rolled up set of blueprints. The two young workers walking beside him are listening and looking toward him. One is an African-American woman.

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At both the federal and state levels, efforts are underway to give workers a retirement savings boost. In one of the latest moves, President Trump signed an executive order this spring designed to enhance the options for workers who don't have access to an employer-provided retirement plan. About 56 million workers fall into this group, or nearly half of U.S. private-sector workers ages 18 to 64, according to research from AARP.

The TrumpIRA.gov, set to launch by the beginning of 2027, will connect these workers, who often include independent contractors, small-business employees, part-time workers and self-employed individuals, to low-cost IRAs from private financial institutions. Workers will be able to compare IRAs based on cost, quality and investment options.

IRAs included on the platform will have to meet certain criteria. They can't require minimum contributions or balances, for one, and their overall net expense ratio can't exceed 0.15%. The menu of investments must include such options as target-date funds, which automatically alter their asset mix to become more conservative as the saver's retirement date approaches, and funds designed to protect principal on an ongoing basis.

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The Saver’s Match

The White House initiative coincides with a government matching-contribution program that also starts next year, known as the Saver's Match, through which eligible workers can get a matching government contribution to their retirement accounts.

In 2027, you must have an annual income of less than $20,500, or $41,000 for those married filing jointly, to qualify for the maximum 50% match from the government. The match gradually phases out, and single filers who earn $35,500 or more, or joint filers who earn $71,000 or more, are ineligible for it. The income thresholds are indexed to inflation in future years. The government contribution is capped at $1,000, or $2,000 for married couples.

The Saver's Match will replace the Saver's Credit, a nonrefundable tax credit that taxpayers whose income doesn't exceed certain thresholds can take when they contribute to an IRA or workplace retirement plan. The maximum credit is $1,000, or $2,000 for joint filers.

Auto-IRAs

Some states are also taking measures to help workers who lack access to employer-sponsored retirement plans by providing automatic IRAs. Through these plans, certain employers that don't offer a retirement plan can enroll their employees to have money automatically deducted from their pay and deposited into an IRA, which is run by a state-approved financial services firm.

Employers can't contribute to auto-IRAs, but the accounts are eligible for the Saver's Match program. That could significantly increase participation in state auto-IRA programs, according to Pew Research Center, which surveyed people who don't have access to an employer-sponsored retirement plan.

At first, 84% of respondents said they were likely to participate in an auto-IRA program. That figure grew to 94% after they learned about the Saver's Match. And though 16% of respondents initially said they wouldn't likely use an auto-IRA, 52% of them expressed higher interest after they learned about the match.

States that offer Auto-IRAs

The following states have implemented or are developing automatic IRA programs, through which workers without access to an employer-sponsored retirement plan can have contributions automatically deducted from their pay and deposited into an IRA.

California
Colorado
Connecticut
Delaware
Hawaii
Illinois
Maine
Maryland
Minnesota
Nevada
New Jersey
New York
Oregon
Rhode Island
Vermont
Virginia
Washington

This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to Kiplinger Personal Finance Magazine to help you make more money and keep more of the money you make.

Lisa has been the editor of Kiplinger Personal Finance since June 2023. Previously, she spent more than a decade reporting and writing for the magazine on a variety of topics, including credit, banking and retirement. She has shared her expertise as a guest on the Today Show, CNN, Fox, NPR, Cheddar and many other media outlets around the nation. Lisa graduated from Ball State University and received the school’s “Graduate of the Last Decade” award in 2014. A military spouse, she has moved around the U.S. and currently lives in the Philadelphia area with her husband and two sons.