Hartford Life Insurance on New Tax Laws
The Hartford Life Insurance website has some valuable information on the recent tax law passed at the end of 2010 which should offer some great opportunities for retired individuals. Income tax rates remain the same through 2012, the Social Security tax from payroll has been dropped, and estate tax provisions have been changed. This translates to a little more money for retired individuals to save or to put towards life insurance policies.
People should be seeing about 2% more in their paychecks. For 2011, Social Security payroll taxes have been reduced from 6.2% to 4.2% giving Americans some more take home pay. Americans are encouraged to put the extra funds towards retirement savings. Many people are even choosing to put these extra funds towards better life insurance policies. According to Hartford Life Insurance Companies, contributing just 2% more on a $25,000 salary towards retirement could translate to an extra $42,000 in your retirement savings account once you reach retirement age. In addition, since contributions are deducted before taxes are taken out, your taxable pay drops and you may see more take home pay than you expected. Another benefit arises if your employer matches your retirement contribution. If they contribute 50% on every dollar which many employers do, your 2% savings increase could mean an additional 1% savings matched by your employer.
Another perk of the new law involves saving more money under the new estate tax provisions. Some people are concerned about saving too much for retirement in case assets they don't spend in retirement might be subject to an estate tax and lessen the inheritance to beneficiaries. With the new tax law, an estate with total assets under $5 million is exempt from estate taxes. On top of this benefit, the estate tax itself has been dropped from 55% to 35%. This is great for affluent professionals who want to take advantage of the maximum contribution to their retirement account which is $49,000 annually, place more funds into a cash balance plan, or defer retirement in annuities. This will give them the confidence that their entire estate will be passed on.
This doesn't take away from the importance of saving for an emergency fund, carrying a quality life insurance policy or spending money wisely, but these are some great benefits to help everyone save a little more for retirement years. No one knows for sure what type of help future generations may receive from the government after retiring, so placing an emphasis on saving is truly wise.