Tax Planning Tool Shows Impact on Retirement Plans

MassMutual on Tuesday launched a tool for advisors working with small business owners to help show their clients the way tax changes that take effect this year will impact their retirement plans.

The program, Solutions for Taxing Times, includes a run-down of 2013 taxes and their effect on various income levels and suggested talking points to help simplify conversations with clients. A calculator is also available to estimate potential tax savings and account balance at retirement.

The program also helps advisors identify which of their small-business clients are most likely to need help.

“Tax-advantaged retirement plans can be structured to show small businesses how to contribute a larger percentage of eligible compensation, thus reducing their tax impact while helping them to save more for retirement,” Thomas Foster, national retirement spokesperson for MassMutual’s Retirement Services Division, said in a statement.

“Our driving principle is to allow Americans to retire on their own terms,” Foster (right) told ThinkAdvisor on Thursday. “We approach that by engaging employers and educating employees.”

Foster said MassMutual surveyed advisors across channels to find out what issues are affecting their ability to grow. The survey found taxes, health care and participants’ retirement readiness are the major challenges advisors face.

Foster said advisors wanted guidance on tax planning issues in a “simplified, focused manner. We spend a lot of time on theory, but not a lot on practicality,” he said.

To address advisors’ concerns, Foster said, “we identified certain new taxes and isolated them by adjusted gross income.”

MassMutual then created a “cumulative peak” to show how those taxes would affect various income levels.

Some of those taxes include a 2% increase on Social Security taxes; a 0.9% surtax on Medicare and earned income for people with an adjusted gross income higher than $200,000; changes to allowable personal exemptions and itemized deductions at the $250,000-$300,000 level; and higher capital gains rate for the $400,000-$450,000 level.

MassMutual’s program includes graphs to show the increase, Foster said, then provides an example of how an individual would be affected in 2013 compared to what they paid in 2012.

“It gives them a way to engage with their CPA,” Foster said.

In addition to the online tools, which can be accessed at MassMutual’s website, other tools like postcards are also available. “We found one delivery system isn’t a good way to reach people,” Foster said. “Any tools we offer can be accessed multiple ways.”