The Savings for American Families' Future Security Act of 2009 (H.R. 1961) would expand access to retirement savings for low- and moderate-wealth Americans.

 

The bill would make the Saver’s Credit refundable, which was recommended by Woodstock in 2007. Five-sixths of eligible tax filers are unable to benefit from the Saver’s Credit because their income tax burden is insufficient; now, all low-income tax filers would be able to receive the full matching payments. The bill would provide a flat 50% match on qualified contributions up to $500 for an individual or $1,000 for a couple, with annual increases of $100 for single filers and $200 increases for joint filers through 2020. The bill increases the income eligibility requirement to $65,000 for joint filers, $48,750 for head of household, and $32,500 for single filers. Finally, contributions would be automatically deposited into a designated retirement account. These measures could increase new savings by $13 billion, according to the Brookings Retirement Security Project.

The  Saver’s Credit, introduced in 2001 and made permanent in 2006, was designed to provide a savings incentive for low- and moderate-wealth households. It provides government matching contributions for individual contributions into retirement accounts, in addition to the regular tax advantage for retirement savings. However, preliminary data from the IRS suggests that the credit has been underutilized.

Economic security in retirement is far from assured for many American families, as recent Woodstock Institute research has shown. Only 52 percent of households have a retirement savings plan, and four out of five older households do not have sufficient assets and income to sustain them through their retirement years. The situation is even bleaker for lower-wealth families: only 10 percent in the lowest income quintile have retirement accounts, while only 30 percent in the second-lowest quintile have retirement accounts.

Woodstock Institute is a member of the Saver’s Credit Alliance and supports efforts to help lower-wealth persons increase retirement security. To join the Saver’s Credit Alliance and receive policy updates, visit to the CFED website.