What Is a Secure Guaranteed Retirement Account (GRA)?

A guaranteed retirement account, or GRA, is a policy proposal from economist Teresa Ghilarducci that would create a mandatory, government-backed retirement account for every worker who does not already have an equivalent employer pension. It has not been enacted into law. Under the proposal, 5% of your pay would flow into an individual account each year, funded jointly by you, your employer, and a flat federal tax credit; the pooled funds would earn a guaranteed rate of return above inflation; and at retirement the balance would convert into a lifetime monthly annuity that stacks on top of Social Security.¹

The Problem the GRA Is Trying to Solve

Traditional pensions have largely disappeared from the private sector, and the 401(k) that replaced them leaves most workers exposed to market risk, high fees, and the temptation to cash out early. The tax deduction for 401(k) contributions also flows disproportionately to higher earners: someone in a 35% bracket saves far more per dollar contributed than someone in a 12% bracket.¹

The GRA is designed around that gap. Workers who retired just before or during the 2008 financial crisis watched their 401(k) balances collapse at the worst possible moment, and the proposal treats that outcome as the thing to prevent. A guaranteed minimum return, professional management, and a ban on early withdrawals are the tools it uses to do so.

How the Account Would Be Structured

The GRA is a hybrid. Each worker would have an individual account with a recorded balance, so you can see your money grow, but investment risk would be pooled across all participants and backed by a government guarantee on returns. You would not choose funds, rebalance a portfolio, or worry about market timing.

Portability is built in. Because the account belongs to you rather than your employer, changing jobs has no effect on the GRA. There are no rollovers to manage and no risk of forgetting an old account at a former employer. Contributions simply continue from each new paycheck.

Who Would Be Enrolled

Every employee who is not already covered by an equivalent or better defined-benefit pension would be enrolled automatically. That targets the workers most likely to reach retirement with too little saved: employees at small businesses, part-time workers, independent contractors paid through payroll, and anyone whose employer offers no retirement plan.¹

Enrollment uses an opt-out mechanism. Contributions begin automatically through payroll deduction on your first day, and you would have to affirmatively opt out to stop them. Opt-out defaults consistently produce far higher participation than opt-in.

How Contributions Would Be Funded

The proposed total contribution is 5% of pay, split between worker and employer. Contributions would be deducted before taxes, similar to how Social Security payroll taxes work under the Federal Insurance Contributions Act.¹

The third funding source is a federal tax credit of roughly $600 per year, deposited directly into the account. That credit would be paid for by eliminating the existing tax deductions for 401(k) contributions, a change the proposal describes as revenue-neutral because those deductions already cost the Treasury billions each year. The distributional effect is the point: every participant gets the same flat credit, rather than tax savings that scale with income.¹

Investment Management and the Guaranteed Return

All GRA money would be pooled and managed by a professional investment board operating under fiduciary standards, meaning the board must act solely in participants’ interests, invest prudently, and diversify to minimize the risk of large losses.²

The core of the design is a guaranteed rate of return, targeted at 2% to 3% above inflation after fees. Ghilarducci estimates actual returns would likely range from 1% to 4% above inflation in any given period based on historical performance. In years when markets decline, the guarantee protects your account’s real purchasing power. When the board’s investments outperform the floor, a portion of the excess would be credited to individual accounts.¹

Pooled institutional management also drives fees far below what most retail retirement accounts charge, particularly the smaller 401(k) plans where total costs including administration and recordkeeping can run above 1%.

What Happens at Retirement

At retirement, your entire GRA balance converts into a lifetime annuity: a stream of monthly payments that continues until you die. There is no lump-sum option. That trade removes the risk of spending down savings too quickly, but it also means you cannot pull out a large sum for a medical bill, a home repair, or a gift.¹

Monthly payments would be calculated from your account balance and life expectancy at conversion. The proposal ties the conversion point to Social Security’s full retirement age, which is 67 for anyone born in 1960 or later.³

Before retirement age, the GRA locks the money away. There are no hardship withdrawals, no loans against the balance, and no early distributions with a penalty like the 10% tax on early IRA and 401(k) withdrawals under 26 U.S.C. § 72(t).⁴ The rigidity is intentional: early withdrawals and loans are the main reasons 401(k) balances end up smaller than projected, and the GRA eliminates the option entirely.

Survivor Benefits

If a participant dies before retirement, the account balance would be paid to designated beneficiaries or converted into a survivor’s benefit. After retirement, the annuity would need to accommodate surviving spouses, likely following the qualified joint and survivor annuity model used in many pension plans, under which a surviving spouse receives between 50% and 100% of the amount that was being paid during the participant’s lifetime.⁵ Rules for non-spouse beneficiaries would depend on the final legislative text.

Tax Treatment

Because contributions go in pre-tax, annuity payments in retirement would be subject to federal income tax under the same general rules that apply to pension and annuity income. If the account has no after-tax contributions, payments would be fully taxable, and the taxable portion is also subject to federal income tax withholding.⁶

Participating in a GRA would not block you from also contributing to a traditional or Roth IRA. What would change is the tax math for workers who currently max out a 401(k): the proposal eliminates the 401(k) deduction and replaces it with the flat credit, so high earners who benefit most from the current deduction would effectively be subsidizing the credit for lower-income workers.

How the GRA Compares to Existing Retirement Tools

Set next to the accounts that already exist, the GRA is easier to place.

Compared with a 401(k), a GRA takes away individual investment choice, loans and early withdrawals, and the lump-sum payout. In return, it provides a guaranteed minimum return, lower fees, full portability, and lifetime income you cannot outlive.
Compared with Social Security, a GRA is a separate 5% contribution on top of the existing 12.4% combined payroll tax. Social Security pays benefits based on your 35 highest-earning years; a GRA pays based on what accumulated in your individual account. The two are designed to stack.
Compared with a traditional pension, a GRA mimics the guaranteed income and lifetime payout, but the balance belongs to you rather than the employer. A private pension can be underfunded or lost in bankruptcy; a GRA’s government guarantee is meant to prevent that.

Where the Idea Stands Today

No federal GRA legislation has been enacted. The closest existing analogue is the wave of state auto-IRA programs. By the end of 2025, 14 states had active programs with more than one million workers saving a combined $2.5 billion, and three additional states had passed enabling legislation. Programs like OregonSaves and CalSavers automatically enroll workers whose employers offer no retirement plan and deduct contributions from their paychecks.

State auto-IRAs share the GRA’s auto-enrollment mechanism and its focus on uncovered workers, but they diverge in important ways. They are Roth accounts, so contributions are after-tax. There is no employer match, no federal credit, and no guaranteed rate of return. Workers keep full access to their money at any time. They are a lighter, more flexible version of the same underlying idea.

Objections and Open Questions

The proposal draws pushback from several directions. Libertarian-leaning critics object to mandatory participation and the loss of individual investment control. The financial services industry, which earns substantial fees managing 401(k) accounts, would lose revenue if the 401(k) deduction were eliminated, and higher-income workers who benefit most from that deduction would lose a meaningful tax break.

There are practical questions the proposal leaves partly open. A government guarantee on returns means taxpayers ultimately backstop the investment risk, and the proposal does not spell out how the shortfall would be covered during a prolonged period of underperformance. The no-early-access rule and mandatory annuity conversion also assume workers cannot be trusted to manage their own retirement money. Data on 401(k) leakage largely supports that assumption, but the trade of collective protection for individual flexibility is a values question that the mechanics alone cannot settle.

1
Teresa Ghilarducci. The Guaranteed Retirement Account Proposal
2
U.S. Department of Labor. Fiduciary Responsibilities
3
Social Security Administration. Benefits Planner: Retirement – Retirement Age Calculator
4
Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
5
Internal Revenue Service. Retirement Topics – Qualified Joint and Survivor Annuity
6
Internal Revenue Service. Topic No. 410, Pensions and Annuities