Dear Carrie,

I work for a small nonprofit. I love my job but don't make a lot of money, so saving for retirement is hard. I do make small contributions to the company's retirement plan, but there's no match. Do you have any ideas on how can I save more?

—A Reader

Dear Reader,

This is a great question—and one of my top personal concerns. There's no question that saving is crucial to your financial security. But unfortunately, with inflation eating into paychecks, saving for anything—especially a distant goal like retirement—can seem more challenging than ever.

So I'm happy your question gives me the chance to talk about a benefit from Uncle Sam that few people are aware of: the Saver's Credit—a special tax break for taxpayers below certain income limits who are specifically saving for retirement. And with the tax filing date just ahead (April 18, 2023, for tax-year 2022), there's still time to take advantage of it this year. Here's how it works.

What it does

The Saver's Credit gives you a tax credit of up to 50% on the first $2,000 in contributions you make to a retirement account. The percentage you get depends on your adjusted gross income (AGI) and filing status, but you could potentially claim a credit of up to $1,000—or up to $2,000 if you file jointly with your spouse. You might think of it as a retirement match from the government.

The Saver’s Credit is applied directly to your tax bill to reduce the amount of income tax you owe. For instance, if your tax bill is $1,000 and your credit is $400, you'd only owe $600. If your tax bill is $1,000 and your credit is $1,000, it's a wash. You'd owe nothing.

What if your tax bill is $500 and your credit is $1,000? Unfortunately, you'd only get the $500 applied to your bill. The Saver's Credit is non-refundable, meaning if your credit is larger than your bill, you don't get the difference.

(Note for the future: Under the new SECURE Act 2.0, in 2027 the Saver's Credit becomes a Saver's Match, with matching funds deposited directly in an individual's retirement account.)

How you qualify

To qualify, you must be 18 or older, not a full-time student, and not claimed as a dependent on someone else's tax return. Then you have to meet the AGI requirements. (AGI is your gross income minus adjustments such as deductible retirement contributions, self-employment taxes, educator expenses and student loan interest.)

To qualify for a 50% credit for your 2022 taxes, a single filer’s AGI can’t be more than $20,500. The AGI limit for a 20% credit is $22,000; for a 10% credit it's $34,000. The AGI limits for married filing jointly are $41,000, $44,000 and $68,000 respectively. If your AGI is over the current limit, you won't receive a credit but these limits are due to go up in 2023 .

Of course, the final qualification is that you make a contribution to a retirement account. There's lots of flexibility here because a wide range of retirement accounts are included: traditional and Roth IRA, traditional and Roth 401(k) or 403(b), governmental 457(b) plan, SIMPLE and SEP IRAs, as well as TSPs and ABLE accounts. (Note: rollover contributions don't qualify, and eligible contributions may be reduced by recent retirement account distributions.)

So let's say you're single, your income is $22,000 and you contributed $1,200 to your company retirement plan. You could claim a 20 percent tax credit of $240.

Now let's say you file jointly with your spouse, your combined AGI is $41,000 and you each put $1,000 (a total of $2,000) into an IRA. You'd both be able to claim a 50 percent tax credit for a total of $1,000.

When to claim it

First, be sure to make any 2022 IRA contributions by April 18 of 2023. Then you may be able to claim the Saver's Credit when you file your regular income taxes. (The deadline for making 2022 contributions to other types of accounts eligible for the Saver’s Credit mentioned above was December 31, 2022.) You'll need to file IRS form 8880 , which will ask for your AGI.

And remember, a retirement contribution may be tax deductible, which can lower your AGI. So you could potentially get the benefit of the tax deduction for your contribution as well as the tax credit. It's kind of a double reward for saving. If you need help with determining if you qualify for the Saver’s Credit check out the IRS’s Interactive Tax Assistant . If you need more help with tax preparation, you may also qualify for free tax assistance from the IRS's Volunteer Income Tax Assistance (VITA) program .

Other ways to boost your savings

The Saver's Credit can be a welcome extra if you qualify, but even if you don't there are other ways to give your savings  a boost. First, make sure that saving is included in your budget. Then set up automatic monthly transfers from your checking account to a savings account to make it easy. Think of it as paying yourself first.

When you have a company retirement plan that offers a match, make sure you contribute enough to get it. Upping your contribution by even a small percentage will increase your savings in the long run. No company plan? Stay at home spouse? You and your spouse may still be able to open an IRA and start making regular contributions. Also, look into a Health Savings Account (HSA) if you have a high deductible health plan. This is a great way to plan ahead for medical expenses, supplement retirement savings—and save on taxes.

Finally, whenever you get some unexpected cash—a raise, a bonus, a tax refund, even a gift—consider putting some of it in savings. The amounts you save may be small at first, but don't get discouraged. They will add up over time. Then take the next step and invest your savings to help your money potentially grow faster. Along with both saving and investing, time and consistency are key factors in achieving your goals. Stick with it!

Have a personal finance question? Leave it in the comments. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact  Schwab.

(#0323-31UM)

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. 

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.