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Legislative Alert - Saver's Credit Expansion

Summarized from the Corporation for Enterprise Development's document Build Wealth & Reward Savings.

OnTrack works daily to help move our clients up the stairs of financial wellness. Building savings is integral to long-term financial stability. As the low-moderate income workers strive daily to make ends meet, savings is held at bay while other bills are paramount.

  • Only 52% of households now own a retirement savings plan.
  • Low-income workers are much less likely to save for retirement than their higher-income counterparts.
  • The majority of low-income workers—more than 92%—are not participating in a 401(k) type plan because many of them are not offered a retirement plan by their employer.
  • Only 37% of those earning under $30,000 annually have access to a retirement account at work.
  • Additionally, 50.6% of those in the lowest income quintile who were eligible to save for retirement through an employer-sponsored plan declined to participate.
  • By contrast, only 5% of eligible workers in the highest-income families (those with incomes in the top 10% of the distribution) declined to participate. Of
    households in the lowest quintile, only 10% even have retirement accounts.
  • Only 35% of households in the second-lowest quintile have retirement accounts. Thus, more than one in five households is asset poor.

The Saver's Credit

The Saver's Credit was designed to incent savings in retirement accounts for low- and moderate-income households by providing a tax credit and stronger savings subsidies for working households. However, due to a design flaw, fewer than six million workers annually claim this credit, a substantial underutilization of the policy.

 Measures supported by CFED to reform the tax credit include:

  • Providing a flat 50% match on deposits into qualified savings accounts up to $1,000/$500 per year for joint/single filers;
  • Automatically depositing this match directly into a designated retirement account; and
  • Extending this benefit to households earning less than $65,000.

These proposed improvements have the potential to fulfill the original intent of the Saver's Credit and build the financial security of more than 50 million Americans.  Funds saved in retirement accounts can also be used for homeownership, college education, or as loans in case of emergency.

Estimates suggest this proposed expansion of the Saver’s Credit, and broader retirement security plan, will stimulate tens of millions of new Americans to invest for retirement. More than 80 percent of the savings incentives will go to new savers, and 75 percent of people eligible for the incentives who are expected to participate in the new program do not currently save. The Brookings Institution’s Retirement Security Project projects at least $44 billion in new savings due to a Saver’s Credit expansion.

Help Increase our Nation's Savings. Email your Legislators Today.

To support this action, click here to send an e-mail to Hagan, Burr, and Shuler, requesting support of this bill.

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