Copyright: | Copyright Business Wire 2011 |
Source: | Business Wire, Inc. |
Wordcount: | 1013 |
Study finds Americans who are most worried about rising taxes are not pursuing tax-advantaged retirement-saving strategies
“Rising taxes can have a bigger impact on Americans with lower incomes, so they are understandably more concerned about that possibility,” said
Foster said there are several tax-saving opportunities for people who worry about rising taxes:
- Savers Credit – Provides up to
$1,000 for individuals and$2,000 for couples who meet specific income eligibility requirements and put aside money for retirement. To qualify for the Savers Credit for the 2011 tax year, taxpayers must have adjusted gross income that does not exceed:$56,500 if married and filing jointly,$42,375 if head of a household, or$28,250 if single or married and filing separately. - Roth 401(k) – Contributions are made after taxes but earnings accumulate tax-deferred and withdrawals are tax-free at retirement. Withdrawals can be taken at any time providing certain conditions are met.
- Traditional 401(k) – Contributions are made before taxes are paid, lowering a plan participant’s overall taxable income. Earnings accumulate tax-deferred and taxes are payable for both principal and earnings upon withdrawal.
- Matching contributions – Employees should check with their employer to determine whether or not their contributions to a 401(k) are eligible for matching contributions. For instance, some employers provide a 50 percent match on the first 100 percent of employee contributions up to 6 percent of their income.
- Roth IRA – Investors can contribute up to
$5,000 in 2011 or$6,000 if age 50 or older if incomes do not exceed$107,000 . Like a Roth 401(k), contributions are made with after-tax money, earnings accumulate tax-deferred and withdrawals are tax-free at retirement, if certain conditions are met.
Rising taxes were cited as the biggest investment concern by 37 percent of respondents with annual incomes below
People with modest means were also considerably less likely to contribute to a 401(k) or similar retirement plan than higher-income Americans, and were similarly less likely to invest in equities or bonds typically found in IRAs, variable annuities or other retirement savings vehicles, the study found.
Foster says this group is missing out on opportunities to significantly enhance savings, “A person with a lower income who contributes to a 401(k) may qualify for both the Savers Credit and a matching contribution,” Foster said. “In this instance, a couple that earns
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