The Retired Investor: Saver’s Match Offers Some Workers up to Half Their IRA Contribution

The Trump administration’s ongoing effort to help low- and moderate-income taxpayers save towards retirement took another step forward last week. The new program will impact millions of Americans who have struggled to save in an economy where they can barely make ends meet.

In a follow-up to my mid-May column on President Trump’s efforts to provide new retirement savings vehicles to low-income Americans, a new modification to his existing program was announced last week.

As I wrote previously, "Many workers say they cannot save for retirement, especially as inflation reduces their paychecks. Others find the application process too complicated or paperwork heavy. Some do not bother because they already have employer retirement plans. For many, retirement seems unreachable due to their background and income."

The Internal Revenue Service and the Department of the Treasury plan to propose a new federal program that will provide up to 50% of the first $2,000 in retirement savings contributions for eligible taxpayers. The amount caps at $1,000 annually and will be paid to individuals based on income beginning in 2028.

This new Saver’s Match would replace the existing Saver’s Credit program, which will still be in place beginning next year. The match would apply to four types of retirement vehicles. Elective deferrals, like those made to a section 401(k) plan. Contributions to traditional IRAs and Roth IRAs. Those made to a section 501(c)plan and certain voluntary, after-tax employee contributions of a qualified retirement plan.

To qualify, an individual must be 18 years old during the taxable year with a modified adjusted gross income of less than $35,500 per year. A similar limit applies to married couples who file separately. For couples who file jointly, the threshold is $71,000, and for head of household, the maximum limit is $53,250.

You do not qualify if you enrolled as a full-time student at a school or took a full-time, on-farm training course given by a school or government agency. How much of the match you receive depends on your adjusted gross income.

This effort is aimed at the roughly 41 million American workers aged 18-65 who lack access to employer-provided retirement plans, according to the TrumpIRA.gov website. That’s a lower number than the 56 million the Pew Charitable Trust came up with in a recent research paper. The government site claims that "A 25-year-old worker who saves $165 per month and qualifies for a $1,000 annual Saver’s Match could retire with roughly $465,000 at age 65."

The math assumes a 6% annual return, and almost $155,000 of that total would come directly from the government’s contributions. For taxable years after 2027, income thresholds will be adjusted for inflation. Applicants can apply for the Saver’s Match through a separate government form (Form 8880-A).

This differs from the existing Saver’s Credit program because the government amount is paid directly into a person’s retirement account. In contrast, the existing credit program offers a tax credit as an incentive. The credit is nonrefundable, meaning it can reduce your federal tax liability to zero but cannot generate a refund by itself.

In my last article, I predicted that Trump would up the income level for those qualifying for the match to $35,500. That is exactly what the proposed regulations now do. Now it is up to Congress to pass the legislation.