In an ongoing effort to strengthen retirement security for Americans, senators on Thursday introduced the “Americans to Save Act” to promote contributions to retirement accounts.
The proposal, if pass, would change the current non-refundable savings credit to a refundable credit that corresponds to a retirement account contribution of up to $ 1,000 per year for people with 401 (k) type plans and retirement accounts individual. Senator Ron Wyden, Democrat of Oregon and chairman of the Senate Finance Committee, introduced the bill alongside six of his colleagues.
The proposal technically states that the credit would be 50% of contributions up to $ 2,000, meaning that a worker contributing $ 2,000 to their 401 (k) would see a credit of $ 1,000. A person who sets aside $ 1,000 in their IRA will get a credit of $ 500. The credit would go to the retirement savings account.
There are income limits to credit. Singles don’t have to earn more than $ 32,500 to get full credit, and couples filing jointly must have incomes of up to $ 65,000, according to the Senate. The match amount would be phased out over the next $ 10,000 for eligible individuals and $ 20,000 for eligible couples, and caps would be adjusted for inflation in the future.
Currently, the retirement saver credit represents up to 50% of a person’s contribution to a retirement account. For unattached individuals, their adjusted gross income must not exceed $ 19,750; for heads of households, not more than $ 29,625; and for married people filing jointly, no more than $ 39,500. Credit is also subject to phase-out beyond these limits. The existing credit is non-refundable, which means the credit can reduce a person’s tax bill, but will not create a refund.