The US government will increase your savings in your retirement account by 50%: what you need to know
A major change coming in 2027 could boost retirement savings for millions of low- and middle-income Americans. Edition Yahoo! talked about what you need to know.
The federal government will begin adding 50% of a person's contributions to a retirement account under the new Saver's Match program. The maximum contribution to participate in the program is $2 per year, you can contribute more, but the program is only willing to pay half of $000 (that is, $2). Saver's Match is a great opportunity to accumulate significant savings. However, to take full advantage of this benefit, action must be taken now.
What is Saver's Match
The Saver's Match program is a key provision of the SECURE Act 2.0, which was signed into law at the end of 2022 and updated the previous SECURE Act passed in 2019. Starting in 2027, Saver's Match will match your contributions to many types of retirement accounts, including 50(k)s, 401(b)s, SIMPLE IRAs and traditional IRAs.
Here's what you need to know about the Saver's Match program:
- the government will match 50% of your contributions to retirement accounts (up to a maximum of $2000 per year). That is, if you deposited $2000 into your account in a year, the government will add $1. If you deposited $000, you will receive $500 from the government);
- The contribution amount will not be taken into account in the annual contribution limits. This means that even if you make the maximum contribution to your 401(k), you can still get a $1000 Saver's Match supplement;
- The federal government deposits money directly into your retirement account. There is no need to report them on your tax returns;
- Traditional IRAs and 401(k) accounts are eligible. Roth accounts are not eligible for the program.
The goal of the Saver's Match program is to encourage savings among lower- and middle-class Americans.
Who is eligible for the Saver's Match program?
The decision about who can receive Saver's Match payments is made based on income level. For tax year 2027, you will have to earn less than the following thresholds to receive the $1000 maximum:
- Single taxpayers: $20
- Couples filing joint returns: $41
- Head of household: $30
If your income exceeds these amounts, your benefit amount is gradually reduced until you reach the following limits, above which you will not qualify for Saver's Match benefits:
- Single taxpayers: $35
- Joint filers: $71
- Head of Household: $53
These thresholds will be adjusted annually for inflation.
Strategies to get the most out of your Saver's Match program
Although the Saver's Match program won't take effect for a few years, you can take steps now to take full advantage of the opportunity to receive additional retirement funds. Here are the steps to take:
- Talk to your plan administrator: Find out if your account will accept Saver's Match deposits in 2027.
- Increase your 401(k) contributions: raising the rate now will make it easier to get the maximum amount. Many retirement planners advise saving 10-15% of your income or even more.
- Open a Traditional IRA: An IRA is eligible for contributions, and you can open one even if your employer doesn't have a plan like a 401(k).
- Pay off your debts: cutting spending now allows you to have more money to contribute to your retirement accounts after 2027.
- Reduce your budget: Find areas where you can cut expenses so you can put more money toward retirement savings when you need it.
- Automate savings and investing: Set up automatic contributions and use target funds or robo-advisors to put saving and investing on autopilot.
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