Millions of individuals may be eligible to receive complimentary retirement funds as per new Act

Millions of individuals may be eligible to receive complimentary retirement funds as per new Act

Newsweek: Over 20 million Americans are eligible for complimentary retirement funds through the new SECURE 2.0 Act.

Starting in 2027, this law allows some Americans to receive a corresponding retirement plan contribution from the federal government.

SECURE 2.0 introduced multiple new retirement provisions to the existing system. Low-income workers can now contribute an amount to their retirement savings that equals the amount they put into their qualifying retirement plans.

Out of all tax filers, 83.8 million individuals have incomes that qualify for the Saver’s Match, but having work income is also necessary to benefit from the new retirement match.

The figure that satisfies those criteria is 21.9 million, as indicated in a recent analysis by the Employee Benefit Research Institute, focusing on those who participate in employment-based retirement plans or regular IRAs.

Each match will be capped at $1,000, calculated at a rate of $0.50 for every dollar given by an employee, with an annual limit of $2,000.

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Financial consultant Stephan Drescher informed Newsweek that the match will be paid immediately as a Roth contribution into the employee’s retirement account, allowing it to grow tax-free and be withdrawn without being subject to taxes.

Individuals with an adjusted gross income of $40,000 or less and couples with an adjusted gross income of $80,000 or less are eligible. The federal government matches 50 percent of the employee’s contributions.

Alex Beene, a financial literacy educator for the state of Tennessee, stated to Newsweek that the savings match set to begin in 2027 is crucial for many working Americans. For years, it has been evident that there is a substantial disparity in the retirement funds of the majority of Americans in comparison to what they would require for retirement.

Lindsay Bryan-Podvin, a financial therapist and the founder of Mind Money Balance, explained that the previous Saver’s Credit was perplexing to many Americans since it permitted 10, 20, or 50 percent of retirement savings to reduce taxes payable.

Bryan-Podvin said to Newsweek that although it decreased a tax bill, it did not directly incentivize retirement savers by providing extra funds for saving.

She mentioned that it is one of the initial instances where individuals with low and moderate incomes might utilize a legal loophole and gain stacking financial benefits.

“This incentive targets low- and middle-income earners, who are most likely to face financial challenges in retirement, encouraging them to save money at present,” stated Bryan-Podvin. “This indicates that qualified Americans do not need to select one corresponding benefit instead of another.” If their job provides an employer match and the ‘Saver’s Match,’ they receive both benefits.

However, it is not a program that covers all aspects comprehensively. Beene emphasized that this should not be considered a comprehensive retirement option, and individuals will still need to rely on personal savings and Social Security.

Beene explained that the purpose is to bridge the savings deficit for low-income people. Americans nearing retirement should continue to make monthly payments whenever possible. An additional $2,000 will be beneficial, but it should complement your savings rather than be the primary focus.

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