Dan Doonan, executive director of the National Pension Institute in Washington, was also delighted with the match. “We think this is very well targeted at the “soft middle” of the pension system,” he said, referring to middle-income workers whose tax incentives to save for retirement he describes as “not very valuable.”
Under the new legislation, retirees receive a direct 50 percent reward up to $2,000 contributed until they reach their maximum modified adjusted gross income, which depends on tax return status.
After the maximum MAGI is reached, the 50% match is gradually reduced to zero.
Take, for example, a joint tax return whose MAGI is $41,000 and a single tax return whose MAGI is $20,500. Joint applicants earning more than $41,000 and single applicants earning more than $20,500 will gradually reduce the number of matches as their income increases to $71,000 and $35,500, respectively.
According to Mr. Mason, if the pair is at $42,000, they will lose a little of the 50 percent match, and if they are at $43,000, they will lose a little more. At $71,000, they won’t get a single match at all.
The saver loan currently has three different lending rates: 50%, 20%, and 10% for different income ranges, creating what critics have called “income crashes.”
For example, a couple earning less than $41,000 can receive a 50 percent discount on contributions to their $4,000 cap on a $2,000 maximum loan. However, a similar couple with an income of $41,001, or just $1 more, would only receive 20% of the loan, or $800.
However, what impact will the new splash screen match have?
In a world where employers constantly urge their employees to “maximize fit,” how many individuals earning less than $41,000 would be able to set aside $4,000 to achieve a maximum match of $2,000?