Saver’s Credit for Retirement Savings Contributions

February 3rd, 2010  |  Published in Retirement  |  Comments Off on Saver’s Credit for Retirement Savings Contributions

This credit used to be known as the “Retirement Savings Contribution Credit.” If you qualify you can claim a credit of up to $1000 for eligible contributions to qualified IRA, 401k, and certain other retirement plans. Since this credit is not refundable it can’t be larger than the tax amount the taxpayer would have had to pay without the credit.

Currently single filers can get a 50% credit of their eligible contributions if their AGI is up to $16,500; a 20% credit if their income is up $18,000: and a 10% credit if their income is up to $27,750. If the single filer’s AGI is over $27,750 they are not eligible for the credit.

A credit equal to 50% of eligible retirement contributions sounds nice but most people making $16,500 and less are probably not contributing or not contributing much to a retirement plan. My guess is that most people who take the credit are those who are eligible for the 10% rate. Although this credit is a nice perk for some I doubt it is actually enticing people to contribute to their retirement plans.

If your income is under $27,500 though be sure to check if you are eligible for this credit. The Saver’s Credit is probably one of the most overlooked credits.

If you owe a small amount in taxes it might be worthwhile to make an eligible retirement contribution just to take advantage of this credit considering you would get 10-50% of your money back.

How the Stimulus Package Affects Retirement

March 11th, 2009  |  Published in Retirement  |  1 Comment

If you’re retired or getting close to retirement, the stimulus package recently signed into law has a few perks in it that could benefit you a little bit. While much of the focus and discussion was on the infrastructure spending, there’s quite a few provisions in there for folks in or nearing retirement. It’s not as sexy to write about in mainstream media, it’s perfectly suited for all you loyal My Retirement Blog readers.

Social Security – $250 Tax Free

If you’re on Social Security right now, you will get a $250 tax-free payment from the government regardless of your income. If you’re a retired government worker who doesn’t get Social Security, you’ll get a refundable $250 tax credit, which is as good as $250 in your pocket. If you and your spouse are both collecting, you’ll each get $250. Not bad right?

Make Work Pay Credit

If you are working, even part-time, you may be eligible for a $400 tax credit ($800 for married couples filing jointly) for ’09 and ’10. The credit phases out if your income exceeds $75,000 ($100k if married) and is gone if your income exceeds $100k ($200k for married). Another gotcha is that you have to deduct the Social Security benefit if you get it, so if you get the $250, then you’re only eligible for $150.

There are other provisions in there that might affect you but these two are the most direct.