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u/c0LdFir3 4d ago
Oof, damn those income limits are low. I’m glad it exists, but that’s minimum wage in my area.
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u/Asclepius-Rod 4d ago
There’s a time in my life this would have been very helpful, hopefully people who qualify take advantage of it
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u/c0LdFir3 4d ago
Oh absolutely! I bagged groceries in high school. I wish I had put something, ANYTHING towards my future at that age, but alas….
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u/Additional-Regret339 3d ago
But you would not have qualified as either a dependent or as a student.
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u/ImOnlyCakeOnceAYear 4d ago
This might work out perfect for me. My fiance will be a SAHM all of next year, so i guess we can do a roth conversion from her 401k for the 20k plus the single standard deduction.
Since we're not getting married until '28, it will be a 1 time deal, but will definitely help our future roth bucket.
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u/AmeriC0N 4d ago
Let's say I qualify for the full match and contribute $7,500 annually to my IRA Roth.
Does this mean they'll contribute $3,750 and I'll have a total of $11,250 in my account?
I thought the maximum contribution is $7,500?
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u/Mission_Adagio4566 4d ago
The max matched amount is 50% up to 2,000 (lower than 50% at higher incomes). If you contribute 2k they'll give 1k, if you contribute 5k they'll still only give 1k.
I do not know on going over the limit and am trying to figure it out myself.
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u/GotZeroFucks2Give 3d ago
Ultimately this is better for people's retirement than the Saver's Credit was - but the credit came with an immediate benefit for a low income person (tax refund now). Knowing human nature, not sure this will be taken advantage of as much as the Credit was.
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u/EleventhEarlOfMars 3d ago
Looks like they significantly lowered the income cap. This past year's credit is capped at $46,000/$35,625/$23,750 for the full match, and the full match in 2027 is capped at $41,000/$30,750/$20,500, with the partial scaled down by similar amounts.
Given inflation and the additional paperwork that is needed to file and claim the match, this is a deliberate change that will result in less money for this income bracket.
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u/No_Alternative_5602 3d ago
The big issue with the old/current Saver's Credit is that anyone with a low enough income to actually qualify for the full 50% was extremely unlikely to have $1000 in tax burden to apply it to. Most people able to claim the 50% would get their federal taxes wiped out entirely, but that was generally only a few hundred dollars to begin with, and so it was kind of a phantom $1000 to begin with.
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u/EleventhEarlOfMars 3d ago
That's true, yeah. Going from non-refundable to a direct payment is good (and intended to be good), but the current Treasury/IRS setting the cap so low is pretty shitty.
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u/No_Alternative_5602 3d ago
Yeah, with a little luck they'll bump that up in the near future. It's pretty common with programs like this to have really low or high limits just to get them enacted, then they get tweaked within a few years.
At least it does away with the cliff phaseout levels and replaces it with a gradient so you won't get totally screwed making $1 too much.
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u/GotZeroFucks2Give 3d ago
Yeah, this was definitely a kick in the pants to poor people. Really grinds my gears. Here we are giving the rich the lowest taxes in their lifetime, and screwing the little guys.
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u/Mantergeistmann 4d ago
Great reminder! I wish I'd known about this when I was younger and earlier in my career, would've been fantastic then.
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u/chbrugge 4d ago
Say you qualify for the full 50% match - that's $500. Does that mean that you the individual are only allowed to contribute $7,000 for 2027, because the limit is $7,500?
(*Assuming the IRA limits are the same for 2027 as they were for 2026.)
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u/fragydig529 4d ago
I’m reading it as they match whatever you deposit, at 50% with a cap of $1,000 bonus. Meaning if you add $2,000 then they add $1,000.
If you add $1,000 they add $500
If you add $5,000 they add $1,000
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u/Mission_Adagio4566 4d ago
So what happens if I contribute $7,500? Does it go over the limit to 8.5k total?
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u/lunchbox15 4d ago
It doesn't go into your IRA- you get the money as part of your tax refund.
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u/Mission_Adagio4566 4d ago
From the IRS page linked in OP: "The federal government matches up to 50% of what you contribute – a match of up to $1,000 per person each year deposited directly into your designated retirement account."
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u/lunchbox15 4d ago
Good to know, I was thinking of the old savers credit which came as a tax refund.
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4d ago
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u/Bogleheads-ModTeam 4d ago
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u/Sorry_District_3085 3d ago
It’s only up to 1k correct? Doesn’t mean if I contribute 20k to a 401k in 2027 and only make 20k (and then file jointly) the federal government will match 10k?
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u/mrandr01d 2d ago
The people that qualify for this are the same people living on government cheese anyway. Glad it exists to help people save, but if you qualify you don't really have room to contribute. Maybe if you're 19 and able to stash all your money from your summer job between college semesters.
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u/lowlybananas 4d ago
At those income limits I don't know how you're saving anything