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March 18, 2013 at 09:19 AM
More than half of middle-income baby boomers said they would save less for retirement if income taxes increased, and 29% said they were less likely to save if capital gains taxes increased, according to a report released March 7 by the Insured Retirement Institute detailing how changes to tax incentives would affect the way boomers save for retirement.
Almost three-quarters of boomers say tax deferral is an important factor in their decision to choose a retirement product; 40% say it’s “very important.” Nearly a quarter said they were less likely to save if tax deferral is reduced or eliminated on financial products.
“Policy coming out of Washington must seek to encourage retirement savings—not discourage it,” Cathy Weatherford, president and CEO of IRI, said in a statement. “As saving for retirement is becoming more and more challenging, now is the time to protect the incentives that are helping Americans attain financial security during their later years.”
Furthermore, 40% of respondents said they would cut their savings rate if the Social Security payroll taxes were increased, the report found.
A report released in February by Securian Financial found that boomers already struggle with incorporating future Social Security benefits into their retirement planning. Just 18% of boomers said they were developing a plan to maximize their Social Security benefits and of those, over half they wouldn’t be able to get the most from their benefits or they weren’t sure.
Over 44% of boomers surveyed by Securian said they started planning for claiming their Social Security benefits when they began to doubt they would have enough income in retirement. Nearly 30% said they started planning because they were worried about the future of Social Security.
“Our survey found that only 18% of baby boomers are making decisions now about how they’ll claim Social Security,” Michelle Hall, manager of Market Research for Securian, said in a statement. “But their focus on Social Security may be rising because half of that 18% tweaked their plans within the last three years.”
