The Hartford Provides Important Tax-Saving Tips to Retirement Plan Participants

Study finds Americans who are most worried about rising taxes are not pursuing tax-advantaged retirement-saving strategies

SIMSBURY, Conn.–(BUSINESS WIRE)– According to new research released today by The Hartford Financial Services Group, Inc., Americans age 45 and older with lower incomes worry more about rising taxes than those with higher incomes. At the same time, this group is less likely to participate in a 401(k) or other retirement plans that could reduce their taxes or provide tax-free income. To help consumers better understand their options, The Hartford is providing retirement plan participants with educational materials outlining valuable tax-saving strategies.

“Rising taxes can have a bigger impact on Americans with lower incomes, so they are understandably more concerned about that possibility,” said E. Thomas Foster Jr., vice president and national spokesperson for The Hartford’s retirement plans. “The Hartford is working with employers that sponsor retirement plans to help educate employees about opportunities to reduce their tax bills, defer taxes on their investment earnings or generate tax-free income.”

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 $50,000, followed by inflation and market volatility, according to The Hartford’s 2011 Taxes and Investment Study, which surveyed 750 Americans age 45 and older. By comparison, only 28.5 percent of those with middle incomes (from $50,000 to $100,000) and 32 percent of those with high incomes (more than $100,000) were as worried about taxes. Although those with higher incomes shared taxes as their No. 1 concern, they were almost equally concerned about market volatility.

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 $50,000 and contributes 4 percent of their income – $2,000 – could qualify for a $1,000 Savers Credit and a $1,000 match. The result is $4,000 in total retirement savings and potentially lower taxes.”

About The Hartford

Celebrating 200 years of helping its customers achieve what’s ahead, The Hartford (NYSE: HIG) is an insurance and wealth management company. Through its unique focus on customer needs, the company serves businesses and consumers by providing the products and solutions they need to protect their assets and income from risks and manage their wealth and retirement needs. A Fortune 100 company, The Hartford is recognized widely for its service expertise and as one of the world’s most ethical companies. More information on the company and its financial performance is available at www.thehartford.com.

HIG-W

Distributions made prior to age 59-1/2 may be subject to a 10 percent penalty unless an exception applies.

This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. This information cannot be used or relied upon for the purpose of avoiding IRS penalties. This material is not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.

Many tax planning strategies emphasize the deferral of current income taxes, on the basis that your federal income tax rate may be lower at retirement. Please keep in mind that federal income tax rates are unpredictable and may be higher when you take a distribution than at the time of deferral. Other factors, including state tax rates and your income, may also affect your overall tax rate upon distribution. Please consult with your tax advisor for individual tax planning strategy and advice. The Hartford does not predict or in any way guarantee favorable tax results.

Some of the statements in this release may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ. These important risks and uncertainties include those discussed in our Quarterly Reports on Form 10-Q, our 20010 Annual Report on Form 10-K and the other filings we make with the Securities and Exchange Commission. We assume no obligation to update this release, which speaks as of the date issued.

The Hartford
David Potter, 860-843-8993
david.potter@thehartford.com
orTimothy Benedict, 860-843-5150
timothy.benedict@thehartford.com

Source: The Hartford Financial Services Group, Inc.