More On Tax Planningfrom The Advisor's Professional Library
- Health Insurance: Health and Medical Savings Accounts A Health Savings Account is a trust created exclusively for the purpose of paying qualified medical expenses of an account beneficiary. Although they are popular, they are not without their pitfalls and the regulations can be complicated. Learn more about how to avoid federal taxation on the accumulation and distributions of HSA.
- Long Term Care Insurance: Premiums While premiums for qualified long-term-care insurance may be deductible as medical expenses there are exceptions to this general rule. Learn how to avoid unnecessary tax liabilities.
The Hartford Financial Services Group is encouraging Americans to redirect the recently implemented two-percentage point reduction in Social Security payroll taxes to their employer’s 401(k) or other defined contribution retirement plan.
The Simsbury, Conn.-based Hartford’s “Two for Tomorrow” campaign, which includes web-based education aimed at employers, employees and financial advisors, reflects a call by a number of companies for plan participants to put the temporary tax break toward their retirement.
The marketing campaign, targeted at a total of 1.6 million retirement plan participants,also emphasizes how participants in an employer-sponsored retirement plan can have several financial advantages, including the potential for matching contributions and tax-deferred savings.
“The reduction in Social Security taxes is a perfect opportunity for retirement plan participants to redirect these additional funds into their retirement accounts,” said E. Thomas Foster Jr., vice president and national retirement spokesperson for The Hartford, in a statement.
“The Hartford encourages everyone whose employer sponsors a 401(k) or other defined contribution retirement plan to consider putting the Social Security tax cut away for the future,” Foster said. “For those who haven’t been taking full advantage of their employer match on retirement savings, 2% can net 3% or 4%.”
Millions of Americans saw a boost in their paychecks at the start of the year as a result of President Obama signing legislation to temporarily reduce the Social Security payroll tax by twp perentage points in 2011 and 2012 on annual wages of up to $106,500.
That means an individual with an annual salary of $50,000 would receive an extra $1,000 in take-home pay this year and next.
Foster said The Hartford hopes that people will continue saving the extra two percentage points after the Social Security payroll tax returns to last year’s 6.2% rate. The additional savings, if continued for 30 years at a hypothetical 6% annual rate of return, could add up to more than $83,000.
Read more about how the Social Security payroll “tax holiday” can aid retirement at AdvisorOne.com.