Have you heard of The Saver’s Credit?

The Saver’s Credit is a little-known tax credit that is generally available to participants who contribute to retirement plans. In addition to offering automatic enrollment and generous matching contributions to encourage retirement plan participation, employers can increase awareness to help improve participation and salary deferrals.

The Saver’s Credit is in addition to 3 other tax advantages available when saving for retirement:

  1. Tax-Deductible Contributions
  2. Tax-Deferred Earnings
  3. Tax-Free Withdrawals 

An Extra Tax Advantage

That’s right it’s an extra tax advantage to save for retirement. Not only is it in addition to the other tax advantages, but a credit is much more powerful than a deduction because a deduction reduces your income and then you’re taxed.

A tax credit comes after your taxes are calculated. Then it reduces the tax you owe, dollar for dollar.

But THIS tax advantage is only for lower-income earners.

Americans are not saving enough for retirement and the problem is worse for lower-income earners so this is an additional incentive to save.

3 Step Action Plan

Here’s a 3-step Action Plan to help your employees save more for retirement.

  1. Awareness. Give them a short summary of their options like this one from the IRS.
  2. Education: Distribute the video above to your employees or book a meeting with a 401k advisor to explain the options in person.
  3. Auto-enrollment: A feature you can add to your 401k plan that automatically enrolls employees into your plan so they can start building wealth, save money on taxes, and possibly qualify for the Savers Credit.

Want more information on the Saver’s Credit? Download our Saver’s Credit guide here.

Looking to improve your retirement plan, change your retirement plan or improve your employee education?

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Disclosures: This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment, tax, or legal advice. We cannot and do not guarantee their applicability or accuracy in regard to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.