The research found Americans age 45 and older who make less than $50,000 are more worried about rising taxes than the middle income group (salaries from $50,000 to $100,000) or high income group (salaries more than $100,000), yet 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.
The Hartford’s 2011 Taxes and Investment Study found 37% of respondents from the lower income group sited rising taxes as their primary investment concern, followed by inflation and market volatility. By comparison, only 28.5% of those in the middle income range and 32% of those with high incomes said taxes were their biggest concern.
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 also less likely to invest in equities or bonds typically found in IRAs, variable annuities or other retirement savings vehicles, the study found.
“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 pointed to the Saver’s Credit, Roth 401(k), Traditional 401(k), matching contributions, and Roth IRA as common, tax-saving solutions.