Many policy developments today are like whispers in a hurricane compared to the current global upheaval. Everyone is eagerly watching the global energy markets, but there are other developments that will have long-term consequences.
One is Europe’s attempt to change its saving and investment policies to put its future economic growth on a more sustainable path. Surprisingly, this endeavor borrows much from U.S. policy.
It is not surprising that the Draghi Report was a turning point for the EU, forcing them to recognize the Union’s desperate need for structural reform to catch up with the U.S. and China in every economic aspect. One area of specific interest is to create a financial ecosystem to address EU’s current challenges, such as rapid technological shifts and the new geopolitical dynamics. This will require the Union to come up with an additional investment of €750‑800 billion per year by 2030, to be used by small and medium-sized enterprises. Such an investment could not be achieved by banking sector alone.
With the goal of connecting household savings with productive investments, the EU is proposing to create EU Savings and Investments Accounts. These accounts aim not only to increase savings but also direct them away from low-yield investments that have been losing purchasing power over the years to more diversified capital market instruments, such as shares, bonds and investment funds. They are also envisioned to be paired with tax incentives to encourage uptake.
Does that sound familiar?
Despite naysayers and alarmists criticizing U.S. savings over the years, the country has been doing that over the years, and quite successfully. Defined Contribution plans, more commonly known as 401(k)s and IRAs, have become a staple for the large portion of U.S. households’ portfolios, not only preparing them for a secure financial future but also bolstering overall investment in the U.S. economy.
This is apparent in the EU’s current discussions. During consultations with member states to shape the EU’s proposed accounts, a cluster of responses focused on taxation, incentives and the portability of these accounts, praising American defined contribution plans for “their simplicity, digital accessibility and powerful tax advantages.”
The facts also point to the success of these plans. According to the Investment Company Institute’, Americans held $13.9 trillion in defined contribution retirement accounts and $18.9 trillion in IRAs at the end of September 2025. Just to put everything into perspective, contrast the almost $33 trillion wealth accumulated in these two types of accounts to the $39 trillion in national debt that has us all panicking. This saving has been achieved over the years by introducing the right policies, based on rigorous economic and behavioral research.
Following Nobel laureate Richard Thaler’s arguments of how humans are inherently prone to procrastination and the positive impact of nudges, two major retirement legislations, SECURE 1.0 and 2.0, have been instrumental in increasing savings through the introduction and expansion of automatic enrollment and escalation. Over the years, the data show that workers that have access to these plans are twice as likely to reach their retirement goals than those without.
In fact, according to a recent report by the Employee Benefit Research Institute, consistent participation in these accounts resulted in “an average account balance increase at a compound annual average growth rate of 15.8 percent from 2019 to 2023, rising from $82,274 to $148,092 at year-end 2023.”
This does not mean that everything is perfect. There is still much work to do to pull in people who do not have access to workplace retirement accounts or expand investment options within the plans. The administration and Congress are trying to do just that with creation of new tax advantaged accounts, like Trump Accounts, or trying to include alternative investment options such as private equity, or new products like crypto within defined contribution plans.
Recent research conducted by the Council of Economic Advisers, for example, shows the impact of increasing private equity in defined contribution plans by between 5 percent and 30 percent. Their numbers show that this diversification could result in a GDP benefit of up to $35 billion, with younger cohorts benefiting more (a 2.5 percent increase in annuitized lifetime income) due to improved returns over longer investment spans.
As they say, imitation is the sincerest form of flattery. Europe’s aspirations show how we have been on the right track when it comes to retirement savings. Over the years, the U.S. has benefitted immensely from its competitive capital markets, and retirement markets have been an integral part of this success story. We should build on this success with the right policy tools, adjusting the policy levers with market changes rather than revamping the entire system because of the occasional alarmist.
Pinar Çebi Wilber is executive vice president and chief economist for the American Council for Capital Formation.
