Generation Beta: First Americans to save for retirement at birth

A new calendar year always reminds us that no matter what happens in our lives or how much we might want to slow down, the world continues to turn. With each passing year, life not only goes on, but the Americans born today will be part of future generations that will grow up with more technological advancements than those who came before them.

The Millennials, whose earliest members were in the Class of 2000, had the benefit of being young during the rise of the internet. Generation Z, whose members were born between the late 1990s and early 2010s, is the first internet-native generation. Americans born from the early 2010s through 2025, whose members comprise Generation Alpha, are the first Americans who have lived in a digital-first world since birth.

Though there is some disagreement over whether or not the next "next generation" — Generation Beta — officially begins in 2025 or 2026, the members of this new demographic cohort also will be unique. In addition to being the first Americans to live with artificial intelligence-driven innovation since birth, they will be the first Americans who will start saving for their retirement when they are born! 

The first Trump Accounts

Starting later this year, families can open Trump Accounts for children born in the U.S. from 2025 through 2028 and begin contributing to those tax-efficient retirement savings accounts on July 4. Under this pilot program, newborn Americans will each receive deposits of $1,000 from the U.S. Treasury. 

This financial shot in the arm at birth will give them quite a head start on achieving the American Dream, which includes saving for a financially secure retirement. In the spirit of that American Dream, Trump Accounts are available to all of the oldest members of Generation Beta, regardless of their parents' income. 

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But just as vitally from a retirement-saving standpoint, Trump Accounts come with restrictions to prevent premature withdrawals, except for important life events. Regular readers of this column will know that premature cash-outs of 401(k) and other retirement savings accounts can threaten plan participants' retirement readiness. Keeping retirement savings incubated and invested in the U.S. retirement system is the first step to increase the income workers can enjoy when they retire. 

Based on the projected number of U.S. live births from 2025 through the end of 2028, the Retirement Clearinghouse estimates that four years of Treasury deposits of $1,000 into Trump Accounts — held by today's newborns until retirement — could grow to $799.5 billion in total incremental retirement savings.  

Digital transportation retirement assets

In addition to assets given to the oldest members of Generation Beta via Trump Accounts, the U.S. workforce may become even more mobile for them than it is today. The Employee Benefit Research Institute estimates that the average American worker today will hold about 10 jobs during a 40-year working life. With hybrid work, side hustles, gig and creative economies only continuing to make inroads, who knows what the American workforce will look like 20 years from now? 

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No one has a crystal ball, but in preparation for Generation Beta members with Trump Accounts entering the workforce, defined contribution plan sponsors and recordkeepers can make it easy for them to transport and consolidate their retirement savings in the future. When recipients of Trump Accounts turn 18, they will be eligible to roll them into their employers' 401(k) plans.

For the members of Generation Beta, the digital experience will be second nature – and the one they will be used to will be even more personalized and streamlined than what we've come to expect. 

Fortunately, there is now an industry-led utility (the Portability Services Network) for facilitating the seamless transfer and consolidation of small-balance 401(k) accounts at the point of job change. Right now, the Portability Services Network consists of recordkeepers that represent about 82 million Americans across over 185,000 employer-sponsored plans. 

Our auto portability simulation estimates that the nationwide mainstream adoption of auto portability facilitated through the Portability Services Network would likely lead to an additional $1.6 trillion in net incremental retirement income for 175.6 million Americans. And that's on top of the $799.5 billion in savings that four years of Trump Account deposits would mushroom into when today's newborns reach retirement. Auto portability is the digital, automatic and standardized transfer of an account with up to $7,000 from a participant's former-employer plan into an active account in their current employer's plan.

For plan sponsors and recordkeepers, taking steps now to make it easy for Americans born this year to increase their retirement outcomes via a digital, paperless account portability process is quite an easy New Year's resolution to follow.