The Best Retirement Tax Credit You Never Knew Existed
The retirement crisis in America is far from being solved. Workers are increasingly responsible for their own retirement savings, but are faced with a seemingly endless supply of obstacles. Households are experiencing stagnant wage growth, rising living expenses, and an overall weak labor market. Making matters worse, millions of people lack financial knowledge and often overlook ways to help them reach their retirement goals.
Benjamin Franklin once said that, “An investment in knowledge pays the best interest.” A large portion of the nation should heed this wisdom and learn about the Internal Revenue Service’s Retirement Savings Contributions Credit, also known as the Saver’s Credit. This overlooked credit is available to low and moderate income workers saving for retirement, but only 23 percent of Americans with annual household incomes of less than $50,000 are aware of the credit, according to the 14th Annual Transamerica Retirement Survey.
“The Saver’s Credit reduces an eligible taxpayer’s federal income taxes dollar for dollar, making it a meaningful incentive for low- to moderate-income individuals and households to save for retirement in a 401(k), 403(b), or IRA. Unfortunately, many may be missing out simply because they are unaware of it,” said Catherine Collinson, president of nonprofit Transamerica Center for Retirement Studies. “It’s critical that we raise awareness of this important tax credit and opportunity to save for retirement so that more workers can take advantage of it and improve their retirement outlook.”