Saver’s Credit: How to get free money to save for retirement

Saver’s Credit: How to get free money to save for retirement
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If you think you have to earn a lot of money to save, you’re in for a sweet surprise. There’s a little-known tax credit that gives low-to-moderate income earners up to $1,000 as a reward for saving money!

RELATED: 14 things to know about Social Security in 2018

Get paid to save money for the future

In 2001, Congress passed what’s called the Saver’s Credit during the Bush administration with the goal of assisting savers who make a decent living but not a huge income.

Here’s the deal: If you save $2,000 in a 401(k), IRA, 403(b) or 457 plan, the government will match your money as much as 50% — up to a maximum of $1,000.

If you save less than $2,000, the government will give you a smaller percentage — either $400 or $200.

The IRS provides a real-world example of how this credit works on its website:

“Jill, who works at a retail store, is married and earned $37,000 in 2017. Jill’s husband was unemployed in 2017 and didn’t have any earnings. Jill contributed $1,000 to her IRA in 2017. After deducting her IRA contribution, the adjusted gross income shown on her joint return is $36,000. Jill may claim a 50% credit, $500, for her $1,000 IRA contribution.”

2018 saver's credit

The Saver’s Credit is the kind of tax credit that you have to ask for when you’re doing your taxes or having them done for you; you won’t automatically get this benefit. The relevant form you’ll need to file is 8880 and it works in conjunction with your 1040A, 1040 or 1040NR — but not the 1040EZ.

Full-time students are not eligible for the credit, nor are people who are claimed as a dependent on another person’s return.

Also disqualified are any rollover contributions, such as money that you moved from another retirement plan or IRA during 2017. In addition, your eligible contributions may be reduced by any recent distributions you received from a retirement plan or IRA.

The real shame is that nobody seems to be aware of this Saver’s Credit in the first place. The Transamerica Center for Retirement Studies has research suggesting that a scant 12% of U.S. workers with annual household incomes of less than $50,000 even know about this credit.

That’s got to change.

Our goal here at is for you to save money. If there’s an opportunity, we want you to take the dough!

RELATED: Here’s your 2018 estimated tax refund schedule

Big investments start with small steps

Theo Thimou About the author:
Theo has co-written several books with Clark Howard, including the New York Times #1 bestseller Living Large in Lean Times. As a single widowed parent of two young children, he strives to bring unique savings tips to men and women like him who must face life without their spouses. He can be reached at [email protected]
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