Roth IRA owners may need a second account to apply for a saver’s match

For low- and moderate-income workers contributing to retirement savings, the new federal savers match, scheduled to begin in the 2027 tax year, could be a very welcome addition to their nest egg. However, many current savers may need a separate account first to get their money.

The Saver’s Match program, authorized by the Secure 2.0 Retirement Act of 2022, provides income-qualified retirement savers with annual contributions worth up to $1,000 for single taxpayers and $2,000 for joint taxpayers. You can reap the benefits whether you save through a workplace plan like a 401(k) or a personal retirement account.

Pitfall: Contributions to an IRA may make a worker eligible for a match, but the funds a worker is entitled to can only be put into a traditional IRA, not a Roth IRA. This means workers who save via Roth, including nearly all workers enrolled in the state auto IRA program, will need a traditional account to receive the match, experts say.

As of April 30, more than 1.2 million accounts in the state program held $3 billion in assets, according to Georgetown University’s Center for Retirement Initiatives.

“State programs absolutely want, can and will support making (Saver’s Match) available to participants, because these are exactly the low- to moderate-income workers that this match is aimed at,” said Angela Antonelli, the center’s executive director.

“However, the state program’s default saver is placed in a Roth IRA, whereas the match must be placed in a traditional IRA, which makes administration unnecessarily complex,” Antonelli said.

“The specific operational elements of Sabers Match are still being developed, but it is expected that eventually both traditional and Roth IRAs will be possible,” a White House official said in an email response to a CNBC investigation.

But experts say Congress may need to vote to approve the funding.

“That’s the law,” says IRA expert and certified public accountant Ed Slott. “Specifically, it says that matches are only sent to pre-tax accounts, which is a little weird because contributing to a Roth qualifies for a match, but you can’t contribute to a Roth.”

Under the Saver’s Match program, single taxpayers with annual incomes up to $20,500 or joint filers with annual incomes up to $41,000 can qualify for a government match of 50% of their retirement contributions up to $2,000, and can receive a match of up to $1,000 annually. Single filers with annual income between $20,500 and $35,500 are eligible for a reduced matching contribution, and joint filers are also eligible for a reduction in matching contributions up to $71,000.

The program replaces the so-called saver’s credit, which will continue to be available to low- and moderate-income retirement savers through the 2026 tax year. It’s similar to the Saver’s Match, which is worth up to $1,000 for single filers and $2,000 for joint filers, depending on your income, but it’s a non-refundable tax credit. This means it can only be used to reduce your tax burden, rather than increasing your refund.

The new Saver’s Match is part of a broader ongoing effort to help workers improve their retirement savings. An estimated 53.7 million full-time and part-time workers between the ages of 18 and 65 lack access to employer-based retirement plans, according to a 2025 study by the Economic Innovation Group, a nonpartisan public policy organization.

A new website, TrumpIRA.gov, is scheduled to launch next year and will allow workers to register for an IRA and, if eligible, collect a saver’s match at distribution.

Although the Treasury Department has not yet issued related guidance, experts expect that a match will be shown once workers’ 2027 tax returns are filed in early 2028. The Treasury Department did not respond to a CNBC inquiry seeking further information.

Meanwhile, 17 states currently have active retirement plans for workers who don’t have employer-sponsored plans. Hawaii is expected to become the 18th state later this year. There are some differences between these programs, but in most cases, employees are automatically enrolled in a Roth IRA through payroll deductions (which start at about 3% or 5%) unless they opt out.

Generally, pre-tax funds placed in a traditional IRA cannot be withdrawn before age 59 1/2 without paying a 10% early withdrawal tax penalty, unless an exception is met.

However, with a Roth IRA, the funds are contributed after-tax, so savers can withdraw their contributions at any time without taxes or penalties.

Some state programs offer traditional IRAs to workers if they choose, but fewer than 1% of workers switch from the default Roth to an IRA, according to Bestwell, a financial technology company that manages most state programs.

“In an ideal world, if you had the ability to bring these match dollars into a Roth, I don’t think anyone would object to that,” said Courtney Eccles, Bestwell’s senior vice president of relationship management.

And, of course, this incompatibility also applies to retirement savings outside of state programs.

“Anyone who is saving for retirement and the only vehicle they currently have is a Roth IRA is going to have the same potential concerns, whether they participate in the state program or not,” Eccles said.

One idea, Eccles said, is for workers enrolled in the state program to open a traditional IRA as a “sidecar” to their Roth IRA when the Saver’s Match is distributed.

However, because of the costs associated with administering an IRA, this can result in additional expenses for workers.

“Both the fees and the administrative complexity could be solved by the Treasury Department,” said John Scott, director of the Retirement Savings Project at the nonprofit research group The Pew Charitable Trusts.

“For example, if (the state) already sets up a Roth for participants, perhaps some of the documentation required to open a traditional IRA would be waived or reduced…that would make it easier to set up and probably reduce costs,” Scott said.