If you are saving for retirement with a 401(k) plan, there is a good chance you enjoy matching contributions from your employer. Those using an IRA do not have that same opportunity, however, as the retirement saving option is opened independently outside of an employer. The Saver’s Match, set to roll out in 2027, will finally give some IRA owners (and workplace savers) a chance to claim a matching contribution.
Created under the Secure 2.0 Act of 22, the Saver’s Match program will “provide income-eligible retirement savers with a matching annual contribution worth up to $1,000 for single tax filers and $2,000 for joint filers,” said CNBC. The Treasury Department will deposit these contributions directly into retirement accounts.
What is the IRA Saver’s Match?
In short, the Saver’s Match is a “government-funded contribution to an eligible retirement account,” said U.S. News & World Report. Under the program, the Treasury Department will direct deposit matching contributions into the retirement accounts of eligible account owners.
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These contributions will be “equal to 50% of retirement contributions up to $2,000, for a maximum yearly match of $1,000,” said CNBC. Eligibility for matching contributions, and the amount of the contributions, is income-dependent.
Who is eligible for the Saver’s Match?
“Eligibility for the Saver’s Match is based on income: single filers with a modified adjusted gross income of $20,500 or less in 2027 (or $41,000 for joint filers) are eligible to receive a 50% match on up to $2,000 of their contributions,” said Investopedia. As income increases, the amount of matches goes down, phasing out for single filers earning between $20,500 and $35,500 ($41,000 to $71,000 for those filing jointly).
Another asterisk in eligibility is that it also matters what type of IRA you have. “Although contributions to an IRA may qualify workers for the match, any money the worker is entitled to can only go into a traditional IRA — not a Roth IRA,” said CNBC. Effectively, this “means that workers who save via a Roth” would “need a traditional account to receive the match.”
Those with workplace retirement plans, such as 401(k) plans, are also eligible for the Saver’s Match if they meet income thresholds.
How does the Saver’s Match compare to the Saver’s Credit?
The Saver’s Match is replacing the Saver’s Credit, which is a nonrefundable tax credit designed to encourage low- and middle-income savers to contribute to a retirement plan. A tax credit is designed to directly reduce the amount of taxes you owe.
The problem with the credit, however, is that it was something “low-income savers largely couldn’t use since they owe little or no taxes,” said Investopedia. With the Saver’s Match, it is not necessary to pay taxes to get the matching contribution. All you have to do is meet eligibility requirements and contribute to your retirement account.
