Author: AskMyFinance Editorial Team

Social Security spousal benefits are one of the most misunderstood — and underutilized — features of the entire retirement system. If you were married, you may be entitled to a benefit based on your spouse’s (or ex-spouse’s) work record, even if you never worked or earned significantly less. Getting the timing right on these benefits can mean thousands of dollars more in lifetime income.

What Are Social Security Spousal Benefits?

A spousal benefit is a Social Security payment based on your spouse’s earnings record rather than your own. If you are currently married and your spouse is eligible for Social Security retirement or disability benefits, you may receive a spousal benefit worth up to 50% of your spouse’s full retirement benefit (also called the Primary Insurance Amount, or PIA).

The key word is “up to.” The 50% maximum applies only if you claim at your own full retirement age (FRA). If you claim early, the benefit is permanently reduced.

Who Qualifies for Spousal Benefits?

To receive spousal benefits, you must meet these criteria:

• You must be married to someone who is already receiving Social Security retirement or disability benefits, or who is eligible for them
• You must be at least 62 years old (or any age if you are caring for the worker’s child who is under 16 or disabled)
• Your own Social Security benefit (based on your own work record) must be less than the spousal benefit you would receive

Social Security automatically pays you the higher of your own retirement benefit or your spousal benefit — you do not receive both.

How Much Is a Spousal Benefit?

The maximum spousal benefit is 50% of your spouse’s Primary Insurance Amount — the amount they would receive at their full retirement age. This maximum applies only if you claim at your own FRA (currently 67 for anyone born in 1960 or later).

If you claim before your FRA, your spousal benefit is reduced by a percentage for each month early. Claiming at 62 (the earliest possible age) reduces a spousal benefit by up to 35%.

Importantly, your spouse’s benefit amount is not affected by when you claim your spousal benefit. The two are independent.

When Should Your Spouse Claim?

Here is where spousal benefit strategy gets interesting: your spousal benefit is based on your spouse’s PIA (their full retirement age benefit), not the reduced amount they actually receive if they claim early. But your spouse must have filed for their own benefit before you can claim a spousal benefit — you cannot receive spousal benefits based on a spouse who has not yet claimed.

However, if your spouse is the higher earner in the household, it often makes sense for them to delay claiming until age 70 to maximize their own benefit — both for themselves and to maximize your survivor benefit if they die first. Meanwhile, you can claim your own (lower) benefit at 62 if you need income, and later switch to a higher survivor benefit if your spouse predeceases you.

Divorced Spouse Benefits

Even if you are no longer married, you may still be eligible for benefits based on an ex-spouse’s record. To qualify:

• Your marriage must have lasted at least 10 years
• You must be currently unmarried
• You must be at least 62
• Your own benefit must be less than the divorced spouse benefit
• Your ex-spouse must be at least 62 and eligible for Social Security (though they do not have to have filed yet, as long as you have been divorced for at least two years)

Claiming a divorced spouse benefit does not affect your ex-spouse’s benefit amount. They receive their full benefit regardless of what you claim.

Survivor Benefits: The Other Half of the Strategy

Spousal benefits end when one spouse dies. But survivor benefits kick in. As a surviving spouse, you may receive up to 100% of what your deceased spouse was actually receiving (or would have received). This is different from the 50% maximum for spousal benefits while both are living.

This asymmetry has major implications for retirement planning: if the higher earner in a couple delays claiming Social Security until 70, the lower earner — who is likely to outlive the higher earner — will inherit a much larger survivor benefit. Delaying can effectively be a form of longevity insurance for the survivor.

Survivor benefits are available as early as age 60 (or 50 if you are disabled). If you remarry before age 60, you generally lose the right to a survivor benefit based on your deceased ex-spouse’s record.

Government Pension Offset (GPO)

If you receive a pension from a federal, state, or local government job that was not covered by Social Security, your spousal or survivor benefit may be reduced by the Government Pension Offset (GPO) rule. Under GPO, your spousal benefit is reduced by two-thirds of your government pension amount. In many cases, this wipes out the spousal benefit entirely.

If you work for a government employer, check whether your pension is covered by Social Security or not — this can dramatically affect your Social Security strategy.

Strategies to Maximize Spousal Benefits

If one spouse earned significantly more: Have the higher earner delay claiming until 70. The lower earner can claim their own reduced benefit at 62 or FRA for income during the interim period. When the higher earner claims at 70, the lower earner may switch to the spousal benefit if it is larger.

If both spouses had similar earnings: Each should evaluate their own delay strategy independently. There may be less benefit from the spousal strategy if both have similar PIAs.

If health is poor: Delaying to maximize the survivor benefit still makes sense if the healthy spouse is younger and likely to outlive the less healthy one — even if the less healthy spouse claims early.

Related: What Is a Pension Buyout?

Bottom Line

Social Security spousal and survivor benefits are a significant source of retirement income for many couples — but only if you claim strategically. The decision of when to claim, who should claim first, and how to coordinate claiming with your spouse can be worth tens of thousands of dollars in lifetime benefits. Use the Social Security Administration’s online tools, or consult a financial advisor who specializes in Social Security optimization, to build a claiming strategy that works for your specific situation.

Series I Savings Bonds (I Bonds) are U.S. government savings bonds that earn a composite interest rate tied to inflation. They are one of the rare investments guaranteed to keep pace with inflation — making them an attractive option when inflation is high and for conservative savings goals like an emergency fund or near-term large purchase. You buy them directly from the U.S. Treasury, not through a broker, and they carry zero default risk.

How the I Bond Rate Works

The I Bond composite rate has two components:

1. Fixed rate: Set when you purchase the bond and stays with your bond for its 30-year life. As of May 2026, the fixed rate is announced by the Treasury in May and November each year. A higher fixed rate is more valuable for long-term holders.
2. Inflation rate: Adjusts every six months based on changes in the CPI-U (Consumer Price Index for All Urban Consumers). Announced in May and November.

The composite rate formula: (Fixed rate + 2 × Semiannual inflation rate + Fixed rate × Semiannual inflation rate). The composite rate cannot go below 0% — if deflation is severe enough to bring the rate to zero, you simply earn nothing rather than losing principal. Check TreasuryDirect.gov for the current composite rate before purchasing.

Purchase Limits

Each person can purchase:

• $10,000 per year in electronic I Bonds through TreasuryDirect.gov
• $5,000 per year in paper I Bonds using your federal tax refund (via IRS Form 8888)

These limits are per Social Security number. A married couple can each buy $10,000 in electronic bonds for a combined $20,000 per year, plus potentially $5,000 more each in paper bonds via tax refund. You can also purchase I Bonds as gifts for others (subject to their limits), and trusts and businesses have separate purchase limits.

Holding Period and Redemption Rules

• Minimum holding period: You cannot redeem an I Bond within the first 12 months after purchase — the money is locked up for at least one year.
• Early redemption penalty: If you redeem between 12 and 60 months (1–5 years) after purchase, you forfeit the last 3 months of interest.
• After 5 years: No penalty. You can redeem at any time with no penalty.
• Maturity: I Bonds earn interest for up to 30 years. After 30 years, the bond stops earning interest and you should redeem it.

Tax Treatment

I Bond interest is:

• Subject to federal income tax but exempt from state and local income taxes
• Taxable in the year you redeem (cash basis) unless you elect to report interest annually (accrual basis — unusual)
• Potentially tax-free if used for qualified education expenses (Education Savings Bond program). The exclusion phases out at higher income levels and requires the bond to be in the owner’s name (not the child’s)

The deferral of federal tax until redemption can be a significant advantage for long-term holders — you control when you report the income.

How to Buy I Bonds

1. Go to TreasuryDirect.gov and create an account using your Social Security number, bank account information, and a driver’s license or other ID verification.
2. Once your account is set up, navigate to “BuyDirect” and select “Series I” under Savings Bonds.
3. Enter the purchase amount ($25 minimum) and your bank account. Funds transfer electronically.
4. Electronic I Bonds are held in your TreasuryDirect account — there is no paper certificate for electronic purchases.

For paper I Bonds, file IRS Form 8888 with your tax return to direct your refund (or part of it) to paper I Bonds. The Treasury will mail the physical bonds to you.

Is an I Bond Right for You?

I Bonds are best for:

• Short- to medium-term savings you won’t need for at least 12 months (emergency fund overflow, down payment savings, wedding fund)
• Conservative investors wanting guaranteed inflation protection
• Savers in high-tax states who benefit from the state tax exemption
• People looking for a safe place to park cash when inflation is elevated

I Bonds are less compelling when the composite rate is near zero, when you need liquidity within 12 months, or when the fixed rate component is very low. Compare the current I Bond rate against high-yield savings accounts and CDs before committing.

Bottom Line

I Bonds offer a combination of inflation protection, federal backing, tax deferral, and state tax exemption that is hard to replicate elsewhere. The $10,000 annual purchase limit caps how much you can hold, but for a safe savings allocation, they are worth including. Buy through TreasuryDirect.gov, hold for at least five years to avoid the early redemption penalty, and check the current composite rate before purchasing to make sure the rate is competitive.

Related Reading

• tax-loss harvesting

A 1099 form is an IRS information return that reports income you received from sources other than a regular employer. If you are a full-time employee, your employer sends you a W-2. But for freelance income, investment income, retirement distributions, rental income, and dozens of other payment types, the payer sends a 1099. You use the information on the 1099 to report that income on your tax return. The IRS also receives a copy directly from the payer — meaning they know about the income whether or not you report it.

The Most Common 1099 Forms

1099-NEC (Non-Employee Compensation)

This is the form freelancers, independent contractors, and gig workers receive. Businesses issue a 1099-NEC to anyone they paid $600 or more during the year for services (other than employees). If you earned $1,500 doing graphic design for a company, they send you a 1099-NEC showing $1,500. This income is subject to both income tax and self-employment tax (15.3% on net earnings up to the Social Security wage base).

Important: you must report this income even if you do not receive a 1099-NEC. The threshold for issuance is $600, but there is no threshold below which the income is non-taxable.

1099-MISC (Miscellaneous Income)

Previously the catch-all for non-employee compensation, 1099-MISC now covers other types of miscellaneous payments: rent paid to a landlord, prizes and awards, royalties ($10 or more), attorney payments, and crop insurance proceeds. If a company paid you $800 in rent or $1,200 in royalties, they send a 1099-MISC.

1099-INT (Interest Income)

Banks and financial institutions send this form if they paid you $10 or more in interest during the year. This includes interest from savings accounts, CDs, money market accounts, and bonds. The amount goes on Schedule B of your tax return and is taxed as ordinary income.

1099-DIV (Dividends)

Brokerage firms send this when your investments paid $10 or more in dividends or capital gain distributions. Box 1a shows ordinary dividends; Box 1b shows qualified dividends, which are taxed at the lower long-term capital gains rate (0%, 15%, or 20% depending on your income). Ordinary dividends are taxed at your regular income rate.

1099-B (Proceeds from Broker and Barter Exchange Transactions)

Your broker sends this for each sale of stocks, bonds, mutual fund shares, or other investments during the year. It shows the proceeds, the cost basis, and whether the gain or loss is short-term or long-term. You use this to complete Schedule D and Form 8949 on your return. The 1099-B can be many pages for active traders.

1099-R (Distributions from Pensions, Annuities, IRAs)

You receive a 1099-R for any distribution from a retirement account, including 401(k)s, IRAs, pensions, and annuities. Box 1 shows the gross distribution; Box 2a shows the taxable amount; Box 7 contains a distribution code that tells the IRS the nature of the distribution (regular distribution, early withdrawal, rollover, etc.). If you completed a rollover, the taxable amount should be $0 and the code should indicate a rollover.

1099-G (Government Payments)

Issued for unemployment compensation (taxable as ordinary income), state tax refunds (taxable if you itemized in the prior year), and certain other government payments.

1099-S (Proceeds from Real Estate Transactions)

Issued when you sell real estate. The proceeds are reported here and must be reconciled with your cost basis to determine gain or loss. Note that gain from selling your primary residence may be excluded (up to $250,000 for single filers, $500,000 for married filing jointly) if you owned and lived in the home for 2 of the 5 years before the sale.

When Do 1099s Arrive?

Most 1099 forms must be sent to you by January 31. Brokerage 1099s (1099-B, 1099-DIV, 1099-INT) often arrive in mid-February and can be corrected as late as March — meaning you may receive an amended 1099 after you’ve already filed. If this happens, you may need to file an amended return (Form 1040-X).

What If You Disagree With the Amount on a 1099?

Contact the issuer directly and request a corrected form (1099-C notation). If they refuse and you believe the amount is wrong, report the income on your return but include a note explaining the discrepancy. Never simply ignore a 1099 — the IRS will match it against your return and flag any unmatched amounts for a notice or audit.

Bottom Line

Collect every 1099 you receive and match them against your records before filing. Report all the income shown — the IRS has the same information. If you are self-employed and receive 1099-NEC forms, also track your business expenses throughout the year, because deductible business expenses reduce the taxable self-employment income reported on the 1099.

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. By investing in a REIT, you gain exposure to real estate returns — rental income and property appreciation — without buying, managing, or financing any property yourself. REITs trade on stock exchanges just like company shares, making them one of the most accessible ways for ordinary investors to add real estate to their portfolios.

How REITs Work

To qualify as a REIT, a company must meet specific IRS requirements:

• At least 75% of total assets must be in real estate, cash, or U.S. Treasuries
• At least 75% of gross income must come from real estate sources (rent, mortgage interest)
• At least 90% of taxable income must be distributed to shareholders as dividends each year
• At least 100 shareholders must own shares
• No more than 50% of shares can be held by five or fewer individuals

The 90% distribution requirement is why REITs typically pay high dividend yields — they are required by law to pass most of their income through to investors. In exchange, REITs pay no corporate income tax, which avoids the double taxation that applies to regular corporations.

Types of REITs

• Equity REITs — Own and operate properties. Rent from tenants is the primary income source. This is the most common type. Subtypes include office, retail, industrial, residential, healthcare, and specialty (data centers, cell towers, self-storage).
• Mortgage REITs (mREITs) — Lend money to real estate owners or purchase existing mortgages and mortgage-backed securities. Income comes from interest, not rent. More sensitive to interest rate changes than equity REITs.
• Hybrid REITs — Hold both properties and mortgages. Relatively uncommon.

Publicly Traded vs. Non-Traded REITs

• Publicly traded REITs are listed on major stock exchanges (NYSE, Nasdaq). You can buy and sell shares at market prices through any brokerage account. Highly liquid. This is what most investors mean when they say “REIT.”
• Non-traded REITs are registered with the SEC but not listed on exchanges. They are sold through brokers, typically with high minimum investments and substantial fees (often 7–15% upfront commissions). Illiquid for years. Generally not recommended for most retail investors due to the fee structure and lack of price transparency.
• Private REITs are not registered with the SEC and are only available to accredited investors.

How to Invest in Publicly Traded REITs

You can invest in REITs through:

• Individual REIT stocks — Buy shares of specific REITs through your brokerage account just like any stock. Examples: Prologis (industrial), American Tower (cell towers), Realty Income (retail), Welltower (senior housing).
• REIT ETFs — Diversified funds that hold dozens of REITs. Vanguard Real Estate ETF (VNQ), Schwab U.S. REIT ETF (SCHH), and iShares U.S. Real Estate ETF (IYR) are the most popular. Expense ratios are low (0.08–0.40%).
• REIT mutual funds — Similar to ETFs but actively managed and purchased at end-of-day NAV. Higher fees than ETF equivalents.

REIT Dividend Taxes

REIT dividends are taxed differently from qualified stock dividends. Most REIT dividends are classified as ordinary income (taxed at your regular income tax rate), not qualified dividends (which receive the lower 15% rate). One exception: under the Tax Cuts and Jobs Act, REIT dividends qualify for the 20% pass-through deduction (Section 199A), which effectively reduces the tax rate on REIT dividends by 20% of the dividend amount for eligible taxpayers.

For this reason, REITs are often better held in tax-advantaged accounts (IRAs, 401(k)s) where the dividend tax treatment is irrelevant — distributions compound tax-deferred or tax-free.

Key Metrics for Evaluating REITs

• Funds From Operations (FFO): The REIT equivalent of earnings per share. Adds depreciation back to net income because real estate depreciation is a non-cash charge that distorts profitability. Look at FFO instead of net income when evaluating REIT value.
• Adjusted FFO (AFFO): FFO minus maintenance capital expenditures — a closer proxy for sustainable dividend capacity.
• Dividend yield: Annual dividend divided by current share price. Higher is not always better — check whether the payout ratio is sustainable.
• Occupancy rate: For equity REITs, the percentage of rentable space occupied. Higher occupancy generally means more stable income.
• Debt-to-equity ratio: REITs typically carry significant debt. Compare to peers in the same sector.

Bottom Line

REITs are one of the most accessible ways to add real estate exposure to a diversified portfolio. For most investors, a broad REIT ETF in a tax-advantaged account is the simplest approach. If you want sector-specific exposure — data centers, industrial logistics, healthcare — individual REIT stocks allow targeted bets. Avoid non-traded REITs due to their fee structure and illiquidity unless you have a specific reason and understand the risks.

A 457(b) plan is a tax-deferred retirement savings account offered by state and local government employers (such as cities, counties, school districts, and public universities) and certain tax-exempt nonprofit organizations. Like a 401(k), contributions reduce your taxable income and grow tax-deferred until withdrawal. But the 457(b) has several features that make it distinctly more flexible than its private-sector counterpart — most importantly, there is no 10% early withdrawal penalty.

Who Has Access to a 457(b)

Access depends on your employer:

• Governmental 457(b): Offered by state and local government employers. Open to all employees (not just highly compensated employees). These are the most common type and are the focus of this article.
• Non-governmental 457(b): Available at certain nonprofits (501(c) organizations). Access is typically limited to highly compensated employees. These plans are funded differently and carry more risk — your money is considered an asset of the employer, not held in trust. Less common and more complicated.

Contribution Limits

In 2026, the standard 457(b) contribution limit is $23,500, the same as a 401(k) and 403(b). There are two additional catch-up contribution opportunities:

• Age 50+ catch-up: An extra $7,500, for a total of $31,000.
• Three-year pre-retirement catch-up: In the three calendar years before the year you reach your plan’s normal retirement age, you can contribute up to twice the standard limit ($47,000 in 2026). This catch-up is separate from and may not be used simultaneously with the age-50 catch-up — you use whichever is larger.

Critically: if you also have access to a 403(b) (common for teachers and university employees), you can contribute the full $23,500 to both plans independently — $47,000 total pre-tax contributions. The 457(b) limit is completely separate from 401(k)/403(b) limits.

The Key Advantage: No Early Withdrawal Penalty

Unlike a 401(k) or IRA, governmental 457(b) plans do not charge the 10% early withdrawal penalty when you take money out before age 59½. If you separate from service for any reason — retirement, resignation, termination — you can withdraw funds immediately without the penalty. You still owe income tax on withdrawals, but not the extra 10%.

This makes the 457(b) particularly valuable for people who plan to retire early (before 59½), such as public safety workers (police, firefighters) with 20–25 year pension eligibility. They can access 457(b) funds immediately upon retirement without waiting for 59½.

457(b) vs. 401(k): Key Differences

Roth 457(b)

Many governmental 457(b) plans now offer a Roth option, allowing after-tax contributions that grow tax-free. If your plan offers both traditional and Roth 457(b) options, the same income and contribution rules as a Roth 401(k) apply: no deduction upfront, but qualified withdrawals in retirement are tax-free. There is no income limit on Roth 457(b) contributions, unlike direct Roth IRA contributions.

What Happens When You Leave Your Job

When you leave government employment, you can:

• Take a cash distribution (taxable, but no 10% penalty)
• Leave the money in the plan if the plan allows it
• Roll the balance into an IRA, 401(k), or another 457(b) — governmental 457(b) assets can be rolled into IRAs or 401(k)s, giving you more investment options in retirement

Non-governmental 457(b) assets generally cannot be rolled into an IRA — they must be distributed according to the plan’s terms. This is another reason governmental and non-governmental plans differ significantly.

Bottom Line

If you work in government or education and have access to a 457(b), it should be near the top of your savings priority list — especially if you also have a 403(b), since you can max out both simultaneously. The no-penalty early withdrawal feature is a standout benefit for anyone who plans to retire before age 59½. Contribute at least enough to capture any employer match, then consider maxing out the 457(b) before the 403(b) if you are uncertain about your retirement timeline.

Required Minimum Distributions (RMDs) are the minimum amounts the IRS requires you to withdraw from most tax-deferred retirement accounts each year once you reach a certain age. The logic: the government gave you tax breaks on the money going in, so it wants to collect taxes when you take money out. You cannot leave the money in tax-deferred accounts indefinitely. For most people in 2026, the RMD starting age is 73 (raised from 72 by the SECURE 2.0 Act). Failure to take the full RMD triggers a 25% excise tax on the amount you should have withdrawn but didn’t.

Which Accounts Require RMDs

RMDs apply to:

• Traditional IRAs
• 401(k), 403(b), and 457(b) plans
• SEP IRAs and SIMPLE IRAs
• Inherited IRAs (different rules apply — see below)

RMDs do not apply to:

• Roth IRAs during the owner’s lifetime (no RMDs required)
• Roth 401(k)s during the owner’s lifetime (as of 2024, SECURE 2.0 eliminated Roth 401(k) RMDs)

When RMDs Start

For most people, RMDs begin at age 73. Your first RMD is due by April 1 of the year following the year you turn 73 (your “required beginning date”). After that, all subsequent RMDs are due by December 31 each year.

Important: if you delay your first RMD to April 1, you will take two RMDs in that calendar year — the delayed first one and the second one by December 31. This double withdrawal can push you into a higher tax bracket. Consider whether it makes sense to take your first RMD in the year you turn 73 to avoid this.

Exception for current employees: if you are still working and do not own more than 5% of the company, you can delay RMDs from your current employer’s 401(k) until you retire. This does not apply to IRAs or accounts from prior employers.

How to Calculate Your RMD

Your RMD for the year equals your account balance on December 31 of the prior year divided by a life expectancy factor from the IRS Uniform Lifetime Table (Publication 590-B).

Example: Account balance on December 31, 2025: $500,000. You are 74 years old in 2026. The IRS Uniform Lifetime Table factor for age 74 is 25.5. RMD = $500,000 ÷ 25.5 = $19,608.

You must calculate RMDs separately for each IRA you own. However, you can then add them together and take the total from any one or combination of your IRAs. For 401(k)s, RMDs must be calculated and taken from each account separately — you cannot aggregate them.

What to Do With Your RMD

You can do anything with RMD funds. Spend them, invest them in a taxable brokerage account, gift them, or donate them. RMDs are included in ordinary taxable income and will raise your AGI for the year. This can affect:

• Medicare Part B and D premiums (IRMAA surcharges apply at higher income levels)
• Taxation of Social Security benefits (up to 85% of benefits become taxable above certain income thresholds)
• Eligibility for certain deductions and credits that phase out at higher incomes

Qualified Charitable Distributions (QCDs): A Tax-Smart Alternative

If you are 70½ or older and charitably inclined, you can make a Qualified Charitable Distribution — directing up to $105,000 (in 2026) per year from your IRA directly to a qualified charity. This counts toward your RMD but is excluded from your taxable income. You receive no charitable deduction, but the income exclusion is often more valuable, especially for people who take the standard deduction. A QCD can lower your AGI and reduce the taxes on Social Security benefits and Medicare surcharges.

Inherited IRA RMDs

If you inherit an IRA, the rules changed significantly under the SECURE Act (2019) and SECURE 2.0. Most non-spouse beneficiaries must now empty the inherited IRA within 10 years of the original owner’s death. Spouses have more options, including treating the IRA as their own. The rules differ depending on whether the original owner had already started taking RMDs. Consult a tax advisor about inherited IRA rules, as they are complex and the IRS issued late-breaking guidance in 2024 clarifying annual distribution requirements.

Penalty for Missing an RMD

Before SECURE 2.0, the penalty was 50% of the missed amount. SECURE 2.0 (effective 2023) reduced it to 25%, further reduced to 10% if corrected within two years. This is still steep — if you missed a $20,000 RMD, the penalty is $5,000 (25%). Take your RMDs on time.

Bottom Line

RMDs are mandatory for most tax-deferred retirement accounts starting at age 73. Calculate them annually using your prior year-end balance and your IRS life expectancy factor. If you don’t need the income, consider a Qualified Charitable Distribution to satisfy the RMD tax-free if you give to charity. Plan ahead — RMDs can meaningfully increase your taxable income and affect Medicare premiums.

Related: Inherited IRA Rules: The 10-Year Distribution Rule Explained (2026)

Related: SECURE Act 2.0: Complete Guide to Retirement Account Changes in 2026

The Saver’s Credit (officially the Retirement Savings Contributions Credit) is a federal tax credit that rewards low- and moderate-income workers for contributing to a retirement account. Unlike a deduction, which reduces taxable income, the Saver’s Credit reduces your actual tax bill dollar for dollar — and it stacks on top of the existing tax benefits of contributing to a 401(k) or IRA. In 2026, the credit is worth 10%, 20%, or 50% of up to $2,000 in contributions ($4,000 if married filing jointly), for a maximum credit of $1,000 per person.

Who Qualifies

To claim the Saver’s Credit, you must:

• Be 18 or older
• Not be a full-time student
• Not be claimed as a dependent on another person’s tax return
• Have adjusted gross income (AGI) below the threshold for your filing status

2026 Income Limits and Credit Rates

Thresholds are adjusted annually. Verify the current limits at irs.gov before filing.

What Contributions Qualify

Contributions to any of the following accounts count toward the Saver’s Credit:

• Traditional or Roth IRA
• 401(k), 403(b), or governmental 457(b)
• SIMPLE IRA or SEP IRA (employee contributions only)
• ABLE account (for disabled individuals)

The eligible contribution amount is reduced by any distributions you took from retirement accounts in the past two years (the current year plus the two preceding years). So if you withdrew money from your IRA recently, it may reduce the credit even if you are also contributing.

How Much Is the Credit Worth?

Example: A single filer with $22,000 AGI contributes $2,000 to a Roth IRA. Their credit rate is 50%, so the Saver’s Credit is $1,000 (50% × $2,000). This $1,000 directly reduces their tax bill. If their tax bill was $800, the credit brings it to $0 — but it is not refundable, so they receive no cash refund from the Saver’s Credit itself (though other refundable credits like the EITC may still generate a refund).

Important: the Saver’s Credit is non-refundable. It can reduce your tax bill to zero but cannot generate a refund on its own. If your tax liability is already zero before the credit, you do not benefit.

How to Claim It

File IRS Form 8880 with your tax return. The form calculates your credit based on your contributions and AGI. Most tax software completes this automatically when you enter your retirement contributions. You must also file Form 1040 (not 1040-EZ, which was discontinued).

Why This Credit Gets Missed

The Saver’s Credit is one of the most overlooked credits in the tax code. Many eligible filers don’t know it exists. Others assume they earn too much, not realizing the income thresholds are more generous than they expect for moderate earners. Part-time workers, recent graduates in their first jobs, and anyone who took a pay cut during the year should specifically check eligibility.

SECURE 2.0 Change: Matching Contributions Starting 2027

Under SECURE 2.0, starting in 2027 the Saver’s Credit will be replaced by the Saver’s Match — a government contribution of up to $1,000 deposited directly into your retirement account (a refundable benefit). For 2026, the current non-refundable credit structure described above still applies.

Bottom Line

If your income qualifies, the Saver’s Credit is essentially free money for doing something you should be doing anyway — saving for retirement. Maximize its value by contributing at least $2,000 to a qualifying account and making sure your tax software identifies and applies the credit. If you have a tax liability and are in the 50% credit tier, this is a direct $1,000 reduction in what you owe.