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Boost Your Retirement Savings with the Hidden Gem: The Saver’s Credit

Retirement dreams: sun-kissed beaches, leisurely pursuits, and freedom from financial worries. But for low- and moderate-income workers, those dreams can feel like distant mirages, especially when it comes to saving. But what if there was a secret weapon lurking in the tax code, ready to supercharge your retirement savings? That’s where the Retirement Saver’s Credit comes in – a hidden gem offering free money to help you bridge the gap between where you are and where you want to be. Get ready to unlock this powerful tool and watch your retirement savings soar, even on a tight budget!

Unlocking the Credit: What is it and who qualifies?

The Retirement Saver’s Credit, also known as the Saver’s Credit, is a tax incentive specifically designed to encourage low- and moderate-income earners to save for a comfortable retirement. This free money can offset a portion of your contributions to eligible retirement accounts, like traditional and Roth IRAs, 401(k)s, and SEPs.

To be eligible, you must:

  • Be at least 18 years old
  • Not be claimed as a dependent on someone else’s tax return
  • Not be a full-time student

Boosting your Savings: How much can you earn?

The credit ranges from 10% to 50% of your contributions, with the exact percentage determined by your filing status and adjusted gross income (AGI). The higher your income, the lower the percentage. For example, a married couple filing jointly with an AGI of $30,000 could receive a credit of $500 for contributing $2,000 to their retirement accounts.

Maximizing your Benefit: Navigating the Phase-Out

The credit phases out gradually as your income rises. Refer to the handy tables within this article to see the applicable percentages based on your filing status and AGI. Remember, the sooner you start saving, the more you can take advantage of the higher credit percentages before your income reaches the phase-out range.


* Modified AGI is determined without regard to the foreign earned income exclusion (also applies to US possessions) and foreign housing exclusion or deduction.

Calculating the Saver’s Credit

The saver’s credit amount depends on factors such as filing status, adjusted gross income, tax liability, and the amount contributed to qualifying retirement programs. An illustrative example helps explain the calculation:


In this scenario, the credit phases out for higher-AGI taxpayers. For a couple with an AGI of $44,000, the credit is limited to 20% of their qualifying contributions. If their AGI were $43,500 or less, the credit percentage would be 50%, resulting in a credit of $1,250.

Smart Strategies: Tips for claiming your credit

Here are some key points to remember:

  1. Start early and contribute consistently: The longer you save, the more time your investments have to grow.
  2. Optimize your contributions: Aim to contribute enough to maximize your employer match (if offered) and fully utilize the Saver’s Credit.
  3. Mind the testing period: Retirement plan distributions within three years before claiming the credit can reduce your eligible contributions. Avoid early withdrawals from retirement accounts to keep your eligible contributions intact.
  4. Seek professional guidance if navigating retirement savings feels overwhelming, or use online resources to calculate your potential credit.

Beyond the Credit: Retirement Savings Powerhouse

The Saver’s Credit is just one piece of the retirement savings puzzle. Traditional and Roth IRAs offer tax deductions on contributions, while employer-sponsored plans like 401(k)s allow pre-tax contributions, lowering your taxable income upfront. Combining these benefits with the Saver’s Credit can significantly accelerate your retirement savings and pave the way for a brighter future.

Empower Your Future: Take Action Today!

Don’t let the fear of financial uncertainty cloud your retirement dreams. The Retirement Saver’s Credit is a powerful tool waiting to be used. Start exploring eligible retirement accounts, calculate your potential credit, and take that first step towards a secure and fulfilling golden age. Remember, the earlier you begin, the smoother and more rewarding your journey to retirement will be.

JS Morlu LLC is a top-tier accounting firm based in Woodbridge, Virginia, with a team of highly experienced and qualified CPAs and business advisors. We are dedicated to providing comprehensive accounting, tax, and business advisory services to clients throughout the Washington, D.C. Metro Area and the surrounding regions. With over a decade of experience, we have cultivated a deep understanding of our clients’ needs and aspirations. We recognize that our clients seek more than just value-added accounting services; they seek a trusted partner who can guide them towards achieving their business goals and personal financial well-being.
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