401k Contribution Confusion

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Topic Author
dylphil21-1997
Posts: 43
Joined: Tue Sep 03, 2019 10:01 am

401k Contribution Confusion

Post by dylphil21-1997 »

Hello all,

I am contributing to a Roth 401k but under deductions on my paystub; it's taking my designated percentage out of gross. For example.

Lets say my paycheck is gross 2000, net 1700; if I'm contributing 7%, shouldn't it be 7% of the 1700 since its going in a roth 401k? And not 7% of the 2000?

Thanks in advance!
BrokerageZelda
Posts: 36
Joined: Sat Apr 10, 2021 10:39 am

Re: 401k Contribution Confusion

Post by BrokerageZelda »

The dollar amount of the contribution to either flavor of 401k is always figured on percentage of gross. So a X% Roth deferral will reduce your take home by more than the same percent traditional deferral.

(edit: I realize that's what you just said; I don't know why it works this way but that's been my experience in general, so it doesn't appear to be a mistake.)
Last edited by BrokerageZelda on Mon May 03, 2021 1:43 pm, edited 1 time in total.
Topic Author
dylphil21-1997
Posts: 43
Joined: Tue Sep 03, 2019 10:01 am

Re: 401k Contribution Confusion

Post by dylphil21-1997 »

BrokerageZelda wrote: Mon May 03, 2021 1:40 pm The dollar amount of the contribution to either flavor of 401k is always figured on percentage of gross. So a X% Roth deferral will reduce your take home by more than the same percent traditional deferral.
That helped me, but also confused me a bit more. As long as it's going where it needs to go.. lol
Hyperchicken
Posts: 755
Joined: Mon Mar 02, 2020 5:33 pm

Re: 401k Contribution Confusion

Post by Hyperchicken »

It's % of gross everywhere that I know of. This also makes it easier to make sure you're capturing all the match.

Some places let you specify absolute $ amount, I heard.

It does not really matter, just adjust the % to whatever you want to contribute.
MrJedi
Posts: 736
Joined: Wed May 06, 2020 11:42 am

Re: 401k Contribution Confusion

Post by MrJedi »

When payroll gets run, your withholdings are based on that paycheck's taxable income. On a Roth contribution, you will see the same amount withheld compared to 0% contribution, since it is all taxable income.

When you contribute to traditional, then the taxable income on that paycheck goes down and withholdings are adjusted down.

If you think from this payroll perspective it may make more sense this way.
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