Savers Credit 2019

[Thrif-t]

Does anyone claim or have experience with the Savers Credit? https://www.irs.gov/retirement-plans...-savers-credit

My oldest daughter could claim some for this year since she's only been working for 5 months. This may be a dumb question but we want to wait until tax time to put money in a Roth for her. She just paid off her student loans and needs to build more of an emergency fund, by April she will be in a better position to throw a couple thousand into a Roth for 2019.

But in January 2020 she is going to start monthly sending $500/mo to a Roth for 2020.

Her 401k at work sucks, it's administered by Wells Fargo, no match and high fee's so I'm gonna have her do her own Roth for now. I want her to get in the habit of monthly sending money to it, and I'm going to help her make it automatic by having Schwab auto deduct from her account every month. I say all this so you understand why the $500 will be for 2020. She has some $ in an emergency fund but wants to build it up more, hence not being comfortable with taking out 2k right now and investing by end of 2019 for savers credit.

So what do you think? Can she in April classify 2k as a 2019 Roth once we are funding a 2020 Roth? Thanks!!

[disneysteve]

I don't know anything about the Savers Credit so I can't address your main question.

However, yes, even if you are already funding your 2020 Roth, you still have until April 15 to fund your 2019 Roth.

That said, why is the plan to start funding 2020 right away? Why not fund 2019 as much as you can first? You never get back that opportunity. If she's going to put in $500/month, make the first 4 payments to 2019, plus whatever else she can add before the deadline. Then start funding 2020.

[Smallsteps]

As long as it is Credited as a "2019" contribution and she is in the income limits etc she can claim the savers credit for the contributions.

[kork13]

I don't know anything about the Savers Credit so I can't address your main question.

However, yes, even if you are already funding your 2020 Roth, you still have until April 15 to fund your 2019 Roth.

That said, why is the plan to start funding 2020 right away? Why not fund 2019 as much as you can first? You never get back that opportunity. If she's going to put in $500/month, make the first 4 payments to 2019, plus whatever else she can add before the deadline. Then start funding 2020.

All of this... Preach, brother. Lol

[Thrif-t]

You're right Steve. I was thinking about the 2k savers credit limit. Thanks for waking me up!!

[Jluke]

Would the 2019 contributions be limited based on earned income (not sure how much she earned in 5 months)?

[Thrif-t]

Would the 2019 contributions be limited based on earned income (not sure how much she earned in 5 months)?

No she can contribute the full amount to a Roth. She just has to be below 19k to get the full credit for the savers credit. She might be over 19k and only get partial credit. I'm not sure how much she earned from her part time job b4 she got her professional job.

I really hate that she can't contribute to a 401k and a Roth. She's a contract worker and most people are contractors before the co hires them full time. Once/If she gets hired, she will be in the cos 401k so its just these first 2 years she can do a Roth only.

But she will use whatever $ she saves to buy a new car out right so I need to quit worrying about her, she will have the income to max out her 401k and be fine! She's a biomedical engineer.

[Like2Plan]

Did your daughter graduate from college in 2019?

[Thrif-t]

Did your daughter graduate from college in 2019?

Yes, May.

[Like2Plan]

Congratulations on the graduation! The bad news though is she can’t take the savers credit. It is further clarified in the instructions:
However, you can’t take the credit if either of the following applies.
-“The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 2002; (b) is claimed as a dependent on someone else’s 2019 tax return; or (c) was a student.
You were a student if during any part of 5 calendar months of 2019 you:
• Were enrolled as a full-time student at a school...

[Thrif-t]

Oh drat Like2Plan but thanks for digging that up. Guess she will never be able to take this(will make to much $). Oh well I guess that's a good thing.