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 sluggish 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 24% of Americans with annual household incomes of less than $50,000 are aware of the credit, according to the 15th Annual Transamerica Retirement Survey.
“The Saver’s Credit is a tax credit that reduces an eligible taxpayer’s federal income tax, 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,” said Catherine Collinson, president of nonprofit Transamerica Center for Retirement Studies. “Unfortunately, many eligible workers may be missing out on the Saver’s Credit because they are unaware of it, including workers who have saved in a 401(k) or similar plan in 2014 who may miss it when filing their tax returns. Other workers might have saved had they known about it.”