A new bill that aims to help working and middle-class families save for retirement was introduced by legislators last week.
Senate Finance Committee Chairman Ron Wyden, D-Oregon, and six Democratic senators proposed the Encouraging Americans to Save Act (EASA), a bill that would reform the existing, nonrefundable saver’s tax credit into a federal matching contribution to middle- and low-income working Americans who contribute to an employer-sponsored or individual retirement savings account.
EASA would replace the current saver’s credit with a 50% government match on contributions of up to $2,000 per year (for a possible $1,000 total match) made to 401(k)-type plans—including 403(b) tax-deferred annuity and section 457(b) governmental plans—and individual retirement accounts (IRAs) for single taxpayers earning up to $32,000 per year and for couples earning up to $65,000.
According to the proposal, the amount of the match would phase out over the next $10,000 of income for individuals and $20,000 for couples.
The bill also includes a COVID-19 recovery bonus credit for up to $5,000 in additional government matching contributions for the first $10,000 saved during a five-year period beginning in 2022, Wyden explained in a statement.
“The bill that has been proposed by a number of senators is a step in the right direction for encouraging Americans to save for retirement, especially working- and middle-class households,” says Gaurav Sharma, co-founder and chief executive officer (CEO) at Capitalize, a fintech company that consolidates 401(k) accounts into a new or existing employer-sponsored plan or individual retirement account (IRA).