401k contribution - math help

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JasonA1987
Posts: 25
Joined: Tue Dec 06, 2016 5:56 pm

401k contribution - math help

Post by JasonA1987 »

Thanks for taking the time to help me understand! So, my question is basically what effect on take home pay, does my pre tax 401k contribution have? Below are some hypothetical :wink: numbers, rounded slightly so the math may not be correct to the cent. I took a stab at this, but I’m just guessing so some expert opinion would be awesome!

Gross monthly pay: $5950
Employer 6% match: $319
Employee 6% match: $319
Additional employees 2%: $106

If the max is $19,000, I could contribute $1583/month, or an additional $1159/month.

If I did so, I’m in the 22% tax bracket, right? So my actual take home pay would only be $900ish dollars less than it currently is?

Feel free to tell me I have no idea what I’m talking about.
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fortfun
Posts: 2770
Joined: Tue Apr 19, 2016 7:31 pm

Re: 401k contribution - math help

Post by fortfun »

If you can afford to do it one month, you should go a head and see what the amount is. You are in the ball park. Of course, you may still owe/get a refund at the end of the year.
MotoTrojan
Posts: 10709
Joined: Wed Feb 01, 2017 8:39 pm

Re: 401k contribution - math help

Post by MotoTrojan »

That is a correct assumption on what you'd owe, but the withholding tables may be a bit off (should be in the same ballpark) depending on how you have your W4 setup.

State taxes matter too, if you have income tax, but that just means even more take-home.
Silk McCue
Posts: 4826
Joined: Thu Feb 25, 2016 7:11 pm

Re: 401k contribution - math help

Post by Silk McCue »

What I can say is that you tax burden will be approximately $259 less each month. Whether that translates directly to $900 per month less in your paycheck will depend upon your withholding.

You will know for certain once you make the change.

Cheers
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FiveK
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Joined: Sun Mar 16, 2014 2:43 pm

Re: 401k contribution - math help

Post by FiveK »

Your exact take home pay for a given paycheck will depend on what you have entered on your W-4.

For your net pay for the year, after you settle up with the IRS at filing time, and if you are in the 22% bracket (and have no state or local income tax), your calculation looks correct.

You could quickly put your numbers into a tool such as the personal finance toolbox spreadsheet or Payroll Deductions Calculator to see what they calculate.
Topic Author
JasonA1987
Posts: 25
Joined: Tue Dec 06, 2016 5:56 pm

Re: 401k contribution - math help

Post by JasonA1987 »

Awesome! Thank you for the help.

I am trying to plan ahead. We will have our last medical bill paid off in a month or two, and a truck shortly after that. I figure if we can afford to pay $1000-1500 a month on debt (Required payments plus significantly extra.) we wouldn’t miss that money when the debt is gone and it can go to retirement saving.

Trying to get too precise with taxes would be a waste because my wife works part time and her pay can vary greatly mont to month.

Thanks again
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