Retirement planning in the United States is full of acronyms. Three tools stand out because they offer something close to free money or unusually generous tax treatment, yet many eligible people don't use them.
1. The employer match
Many employers match part of what employees contribute to a 401(k) or similar plan, for example 50 cents on each dollar up to 6% of salary. Not contributing enough to get the full match means turning down part of your pay. Matches may be subject to a vesting schedule, meaning you have to stay a certain time to keep them, so check your plan's rules.
Since the SECURE 2.0 Act of 2022, employers may also make matching contributions based on employees' student loan payments, helping people who cannot afford to save while repaying loans.
2. The health savings account
An HSA is available to people covered by a qualifying high-deductible health plan. It is the only account in the US tax code with three tax advantages: contributions are deductible (or excluded from pay), growth is untaxed, and withdrawals for qualified medical expenses are tax-free. After age 65, money can be withdrawn for any purpose, taxed like a traditional IRA. Because health costs are large in retirement, some savers treat the HSA as a retirement account and pay current medical bills from other funds.
3. The Saver's Credit, and the coming Saver's Match
The Retirement Savings Contributions Credit, known as the Saver's Credit, gives lower and moderate-income workers a tax credit for contributing to an IRA or workplace plan. It is widely underused, partly because it is non-refundable: it only helps people who owe income tax.
SECURE 2.0 replaces it from 2027 with the Saver's Match: a federal matching contribution of up to $1,000 a year deposited directly into an eligible person's retirement account, phasing out at higher incomes. Because it will be paid into the account rather than reducing tax, it should reach people who currently get no benefit.
A caution
These tools suit different people. An HSA only makes sense with a suitable health plan; the match only exists if your employer offers it. Check your plan documents and the IRS rules for the current year.
Sources
General information about the law as it stood when this page was updated, not financial, tax or legal advice. Rules and limits change; check the official source or a qualified adviser before acting.