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Low-income Americans are more likely to worry about rising taxes than their wealthy counterparts, according to research released Thursday by The Hartford. Americans who make less than $50,000 per year are more likely to be concerned about taxes than those who make more than $100,000 per year. Middle-income Americans have the lowest level of concern.
Despite reporting that they're worried about the effect of increased taxes, low income Americans are also less likely to participate in 401(k)s or other tax-efficient retirement plans. The report also found inflation and market volatility to be top concerns.
Tom Foster, vice president and national spokesperson for The Hartford's retirement plans, suggested Americans take advantage of tax-efficient savings plans like 401(k)s and Roth IRAs. He also stressed the importance of taking advantage of an employer's company match, and the Saver's Credit provided by the IRS, which provides up to $1,000 for individuals and $2,000 for couples who contribute to an employer-sponsored retirement plan.
"Advisors need to understand the various opportunities available, and to work with plan sponsors so they can take those opportunities to participants," he told AdvisorOne. "I'm on the road constantly to educate advisors so they understand the issues."
The Harford has a bevy of specialists who provide support to advisors and plan sponsors.
"In the field we have 85 regional sales directors whose goal is to work with advisors and plan sponsors so they can help participants," Foster said. "We have 64 regional planning consultants who work with sponsors on enrollment and education, many of whom have backgrounds in teaching. There are 32 retention specialists who work with existing clients. We have a very active goal to take education to participants."
Foster stressed the importance of working with advisors and specialists. "It's interesting that respondents are concerned about taxes, but aren't doing anything about it," he said. If you don’t do anything, it'll get worse. Do whatever you can, do whatever you're financially able to do. Don't try to do it by yourself."
A report released April 1 from the Employee Benefit Research Institute found low-income workers are more likely to be hurt if Congress lowers or eliminates the tax exclusion on employee contributions to retirement plans. EBRI's 2011 Retirement Confidence Survey found 56% of full-time workers would reduce the amount of their contributions if they couldn't deduct the contribution from their taxable income.