‘Saver’s Credit’ – Helping eligible taxpayers offset the cost of saving for retirement

In terms of financial planning, saving for retirement is a common goal that quickly comes to mind for many. However, in today’s environment, it can prove to be a difficult task to budget basic cost of living needs and expenses for a family – while also striving to prioritize saving enough to pay yourself in the distant future, also known as, your retirement.

This is where the “Saver’s Credit” may help for some. To encourage individuals with low and modest incomes to set savings aside for retirement, the IRS offers the “Retirement Savings Contributions Credit,” commonly referred to as the “Saver’s Credit.”

What is the Saver’s Credit, you might ask? The Saver’s Credit is a tax credit available to taxpayers with an AGI (Adjusted Gross Income) of $32,500 ($65,000 if married filling jointly) or less who contribute to certain retirement accounts during the year, including contributions made to an employer-provided plan at work, such as a 403(b) or 457 plan, 401(k) or on your own through an IRA. A few additional requirements apply to be eligible for the credit, you have to be 18 years or older, not a full-time student and you can’t be claimed as a dependent on anyone else’s tax return.

Up to $2,000 ($4,000 if married filing jointly) in voluntary retirement contributions can count toward the credit. Depending on filing status and income level, the credit pays between 10 and 50 percent. This tax credit can be claimed in addition to the benefit of contributing on a pre-tax basis to a qualified retirement account.

Get a jump start and maximize savings toward retirement for the 2021 tax year, consider beginning or increasing voluntary retirement contributions through the 403(b) and/or 457 voluntary retirement plans. For employees participating in the Purdue Matching Retirement and Savings (PMRS) program, contributing a minimum of four percent to the 403(b) voluntary plan will also ensure the maximum matching University contribution is received.

More information about the Saver’s Credit, including the 2020 income limits and credit amounts, can be found on the IRS website.  Fidelity representatives can answer any questions and provide assistance with the Saver’s Credit, retirement planning, voluntary retirement contribution setup, and Purdue’s retirement program, in general.

Fidelity representatives are available to assist you via phone and virtually. To make an appointment, call 800-642-7131 or schedule online.