Trump vs. Obama: Whose 401(k) Made You Richer?

Tyler Gardner (0:00)

The point is, the tools aren't the issue. The real problem is whether people have the knowledge, guardrails and fiduciary protection to use those tools well. Give someone a hammer and they can build a house. Or if they don't know what they're doing, they can just as easily demolish the neighbor's mailbox and get a very stern letter from the HOA. The hammer's not the problem.

Hello, friends. This is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. I want to start this week's episode by admitting something that feels a little like confessing I still sometimes Google how to hard boil an egg.

I am deeply afraid of talking about money when it even remotely brushes up against politics. It feels like trying to explain the rules of cricket at Thanksgiving. Half the room politely nods and pretends to care, the other half throws turkey legs at you and never hears a word you said. But here's the reality that I know we all know. Sometimes finance and politics are like peanut butter and fluff, completely inseparable. Other times, they're more like peanut butter and motor oil. They really don't belong together. But here we are, always pretending that they do. So lovingly, I've decided to subtitle this week's episode, Things You Should Care About, Regardless of Who You Love or Hate in Washington. Because while we can all agree on very little these days, I think we can agree that whether or not you get to retire before you're 87 is worth setting aside partisan rage for just over 25 minutes. In this episode, I'm going to walk through how the Obama administration thought about shifting the 401k system, and how the Trump administration thought about and is thinking about the same. I'll serve up some facts that some of you might call not facts, highlight a few distinctions, and then, like Clint Eastwood in The Good, The Bad, and The Ugly, we'll squint meaningfully into the sun and talk about what actually matters. But before we get into it, a quick disclaimer. As many of you should know, no policy will ever be objectively good for everyone, and none will be objectively bad for everyone. That's just not how truth works, and it's not how money works. And before you email me telling me I'm a ding-dong who clearly supports Eurasia over East Asia, please remember, I am not here campaigning for anyone. I don't even like campaigning for Girl Scout cookies. This is about education, not electioneering. And honestly, it's also a personal challenge for all of us, because it's become nearly impossible to have a curious conversation about anything these days without someone assuming you're plotting to steal their lawn sign. So, my challenge to you, just for this episode, try on the radical idea that you can think someone is a complete ding-dong and still concede they may have stumbled onto one semi-reasonable thought. You see how many qualifiers I just used there? Stranger things have happened, but I'll leave that part and that judgment to you. Now, before we dive in, I do have one small request this week. I have put together a short survey in the show notes. It's painless. I promise it should take you about 97 seconds. And most importantly, it will help me figure out who's actually listening, what you're enjoying, and what you want more of. Think of it as leaving a tip for your waiter. If you found this meal useful, fill it out. If not, you can always complain on Yelp later. And if you did enjoy it, then leaving a review on Apple Podcasts is the audio equivalent of sending me a fruit basket. Absolutely would love it. In exchange, at the end of today's episode, I've got a great book recommendation for all of you. One that changed my financial life entirely and really taught me to think more appropriately about how to invest my money. Okay, on to the meat of this week's episode.

We're going to be tackling something that sounds dry, but is secretly very juicy for your wallet and for your heated political debates over the holidays, 401k policy. Specifically, what Obama proposed versus what Trump recently put forward. And last disclaimer, when I say recently, I'm fully aware that by the time you're hearing this, the news cycle has already chewed this up and spit out three new scandals. That's fine, because I always aim for content that's as useful today as it will be in 20 years. None of this is timely, unlike my high school bio class, which expired roughly three weeks after I graduated. So let's keep it focused. We're not debating personalities, rallies or haircuts. We're just going to talk about the money side of things, how these policies might affect your retirement, and to keep it digestible, I've boiled it down into five big ideas that you should care about, regardless of your politics. Access, simplicity, fiduciary rules, risk and education. Let's start with the most basic one, whether people can even get in the door. Thing you should care about number one, before we offer or care about options, we need access. Here's a sobering fact to chew on while you stir your morning coffee. According to the Bureau of Labor Statistics, about 68% of private sector workers have access to a retirement plan through their job. That sounds decent, until we follow that up and realize that only 52% actually participate, which is a bit like being given a free gym membership and then deciding, I'll just keep using my ottoman as a peloton. The meditation part of peloton, that is. And if you work for a small business, the odds get even worse. Only about half of workers at firms with fewer than 100 employees have access to an employer-sponsored plan at all. That's roughly 57 million Americans wandering around without a workplace retirement plan as of 2023 Victor Fenway Park filled the capacity times, well, a lot. Math is hard, and I already told you my high school classes didn't exactly stick with me, but I trust you get the idea. That gaping hole is what policymakers have been trying to close. Obama's answer was the auto IRA, basically requiring employers with more than 10 workers and no retirement plan to automatically enroll their people in one. He also suggested scrapping the bizarre common bond rule that said small businesses could only share retirement plans with other small businesses if they were in the same industry. His idea? Let your neighborhood bookstore and your local dentist pool resources and costs. After all, why should Teeth and Tolstoy not share a 401k? Trump's Department of Labor did loosen these same MEP rules in 2018, but only slightly. More like cracking the door when Obama wanted to blow the hinges off entirely. Now, why does this matter? Because access predicts outcomes. Let me repeat that. Access predicts outcomes. Vanguard's How America Saves 2023 report shows that the average 401k balance after 10 plus years is north of $250,000.