Millennials, of all people, should thank Trump defending 401(k)s

But as with most things millennial, perception rarely matches reality. The truth is that after taking the brunt of the Great Recession, the millennial generation has set its sights on saving, and President Trump is working to keep it that way.

Millennials have grown up in uncertain financial times. Their unemployment rate has consistently been double, and even triple, that of the national average through the recession and subsequent recovery. The underemployment crisis is even worse. According to a recent Accenture study, 51 percent of 2014-2015 graduates are holding jobs that don’t require the college degrees they’ve earned, a figure that has risen dramatically over the past 15 years.

Equally troubling, they will likely face the consequences of a deteriorating fiscal landscape. In an annual report released over the summer, the trustees of the Social Security program projected that its trust fund will be tapped out by 2034, long before young adults would contemplate retirement. At that point, the program would only have enough revenues to pay 77 percent of the promised benefits. Little wonder, then, that a mere 6 percent of millennials believe their Social Security benefits will be commensurate to those of today’s seniors.

Those economic and fiscal forces have made young adults more cautious than their forebears. In 2015, the Government Accountability Office found that around half of Americans aged 55 and older have absolutely no retirement savings. The same report found that Social Security remains the largest component of household income among those aged 65 and older.

Fortunately, young adults aren’t gambling their future on the idea that Washington will right the Social Security ship.

“We’re not counting on the government. We’re not counting on companies,” Giovanni Marcantoni, 32, told The Baltimore Sun. “We’ve seen that if you don’t save money, you’re screwed.”

And according to the data, they are saving money. A higher percentage of millennials are contributing to their company’s 401(k) retirement savings plan than either Gen Xers or Baby Boomers, according to a recent report from Bank of America Merrill Lynch. Likewise, young adults are on track to replace more of their pre-retirement income via 401(k) accounts than any previous generation. A study, conducted by Wells Fargo, found that millennials are building their retirement accounts fast enough to equal 66 percent of their pay if they quit work at age 65 and begin drawing Social Security.

Part of what has made this possible is the favorable tax treatment of 401(k) accounts. Currently, the tax code allows Americans to stash away cash before taxes, meaning contributions to retirement are taken from a paycheck before taxes are deducted. This, in turn, lowers the amount of income that Americans pay taxes on in the present, which means more money in their pockets, and more incentive to put money toward retirement.

There are some reports that Congress, as part of much-needed efforts to fundamentally reform the tax code, is considering limiting the tax benefits of 401(k) contributions. The spirit of the change is dead on: Every effort should be made to clean out the myriad deductions, credits, and loopholes in an effort to lower our income tax rates. That would result in a more-level playing field, with higher wages, faster growth, and more jobs.

But tax-deferred accounts are an exception to the broaden-the-base-to-lower-the-rates mantra. By incentivizing private savings, 401(k) plans keep people off government benefits later in life, and provide investment of productive capital that makes the economy grow.

At the first hint that the 401(k) deduction was on the negotiating table, President Trump stood up to quash the idea. He tweeted:

Millennials should cheer the news. Young adults have been on the losing end of a bad economy and are set to get a raw deal on the promises of Social Security. Nevertheless, they have been proactively taking the steps necessary to insulate themselves from what the Government Accountability Office just labeled a looming “retirement crisis.”

While it’s important for policymakers to consider all options at the negotiating table, President Trump should be applauded for defending 401(k) plans. Now, onward toward tax reform!

Chandler Thornton (@chandlerUSA) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is the chairman of the College Republican National Committee.

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