Turn the Spotlight on Tax-Friendly Benefit Options


Young employees are in the dark when it comes to retirement planning, and as a result, potential tax savings are slipping through their fingers, according to a taxpayer survey by CCH and Harris Interactive.

Employees ages 18 to 24 were least likely to use company-sponsored
401(k) plans—participation rates sit at 28%, with just 4% reaching maximum levels and 16% putting away the amount needed for the greatest employer contribution allowed under the plan, according to the survey. Participation in tax-advantaged IRAs and medical flexible spending accounts was 19% and 10%, respectively, and a lack of education may be to blame—57% said they didn’t know if they qualified for a traditional or Roth IRA and 11% were uncertain if their employer offered a medical FSA.

Nearly one in five rated their employer as horrible in delivering tax-advantaged benefit information. Tax analyst David Bergstein, CPA, suggests that firms consider if they’re using the communication avenues that young employees are most receptive to. “If young workers are not hearing the message, no matter how good it is, they don’t have the information they need to make informed choices,” he said.

To avoid using catch-up contributions later in life, Bergstein suggests employees of all ages consider these tax-saving, retirement-friendly habits:

Add up how much you paid in income taxes for 2006 and research what tax-saving benefit programs and tax-advantaged accounts you qualify for.

Participate in a medical FSA.

Contribute to a 401(k), at least up to the amount needed for the maximum employer contribution.

Take a portion of your 2006 tax refund and put it toward retirement.

Source: CCH and Harris Interactive taxpayer survey, http://hr.cch.com/news.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

VIDEO

How to Excel pivot a general ledger

The general ledger is a vast historical data archive of your company's financial activities, including revenue, expenses, adjustments, and account balances. J. Carlton Collins, CPA, shows how to prepare data for, and mine data with, PivotTables.

QUIZ

News quiz: Taking an economic snapshot and looking to the future

Recent news included IRS actions that affect individuals and partnerships and a possibly influential move by a Big Four accounting firm.Take this short quiz to see how much you know about the news.