The Hartford Financial Services Group Inc. is initiating the Two for Tomorrow marketing campaign, which recommends Americans redirect the newly implemented reduction in Social Security payroll taxes to their employer's 401(k) or other defined contribution retirement plan. Various educational initiatives designed for employers, employees and financial advisers are also included.
At the beginning of 2011, millions of Americans earned a higher paycheck because of legislation that temporarily reduces the Social Security payroll tax by 2 percent in 2011 and 2012 on annual wages of up to $106,500. Ultimately, this means an individual with an annual salary of $50,000 will receive an extra $1,000 in take-home pay for the next two years.
"The reduction in Social Security taxes is a perfect opportunity for retirement plan participants to redirect these additional funds into their retirement accounts," says E. Thomas Foster Jr., vice president and national retirement spokesperson for The Hartford. "It's a painless way to enhance retirement savings and help build a more secure financial future."
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By using direct outreach and Web-based education tools, the Hartford is reaching plan participants, their employers and financial advisers, and it's even estimated as many as 1.6 million retirement plan participants can be reached.
Additionally, the campaign examines how participating in an employer-sponsored retirement plan can have several financial advantages, such as the potential for matching contributions and tax-deferred savings.
"For those who haven't been taking full advantage of their employer match on retirement savings, 2 percent can net 3 percent or 4 percent," Foster says. "Many employers match employee retirement savings up to a specified ceiling. Employees who do not take advantage of this are missing out on investments that can automatically provide a substantial return."
The Hartford hopes many employees will still save the additional 2 percent after the Social Security payroll tax returns to 2010′s 6.2 percent rate, Foster notes. If the extra savings is continued for 30 years at a hypothetical 6 percent annual rate of return, it could amount to more than $83,000.
"The Hartford encourages everyone whose employer sponsors a 401(k) or other defined contribution retirement plan to consider putting the Social Security tax cut away for the future," Foster says.
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