Impacts of the Retirement Savings for Americans Act

Impacts of the Retirement Savings for Americans Act

CARTER C. PRICE, JEFFREY B. WENGER, PHILIP ARMOUR, MATTHEW B. FORBES, HSIN SHENG MA

Other publication

RAND Research Report

2025

The Retirement Savings for American Act (RSAA) would make available a portable, posttax retirement savings account to working Americans otherwise not covered by an employersponsored retirement plan.1 These accounts would include automatic enrollment and, for those who earn less than the median income, a contribution from the federal government equivalent to 1 percent of a person’s annual income, plus as much as a 4-percent government match for participants who save 5 percent of their post-tax income. Overall, we find that about 63 million workers (about 39 percent of the U.S. workforce) do not have access to an employer-sponsored savings account and, therefore, would be eligible for an RSAA account. Within that group, about 42 million workers (about 26 percent of the U.S. workforce) would receive federal matching funds. In practice, such an account would offer more benefits to younger workers because they are more likely to earn below the median annual earnings. As workers age, they are more likely to earn above median annual earnings, meaning their federal matching contributions would phase out; additionally, older workers are more likely to work for employers that offer retirement plans, meaning they would transition off the plan entirely. Under an optimistic scenario, we estimate that an RSAA account would enable the lowest earners (those who consistently earn in the bottom 10 percent of the earnings distribution) to save approximately $126,000 over a 40-year working career. Those who earned at the 50th percentile during their working career would be able to save $585,000. Such a scenario assumes that all eligible workers participate, none of the money is withdrawn during the intervening 40 years, and that employers with existing retirement plans do not drop their plans in favor of the RSAA accounts. Under the same optimistic assumptions, we calculate a net savings to the federal and state governments of more than $2 trillion from the RSAA accounts over a 40-year timespan. That is, we estimate the net costs to the federal and state governments for the RSAA accounts will be $274 billion in the first ten years and almost $1.5 trillion over 40 years, along with a reduction of more than $3.6 trillion over those 40 years in government spending on Medicaid and Supplemental Security Income (SSI) for seniors.2 A 40-year window allows us to understand the effects of the RSAA over a time horizon consistent with a full working career. Table S.1 presents the costs and outcomes from this baseline scenario and scenarios in which we explore the extremes of each of the key behavioral assumptions.