Lower Payroll Withholding - What are you doing with it?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Grt2bOutdoors
Posts: 18149
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Lower Payroll Withholding - What are you doing with it?

Post by Grt2bOutdoors » Mon Feb 12, 2018 9:02 am

Lower payroll withholding due to the new IRS tax tables for 2018 is resulting in higher take-home pay (for those employed).
I am investing it according to our IPS. What are you doing with yours?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
AtlasShrugged?
Posts: 528
Joined: Wed Jul 15, 2015 6:08 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by AtlasShrugged? » Mon Feb 12, 2018 9:14 am

I lowered my number of exemptions from 4 to 2. Why? I had a 2K tax bill for 2017 - a little too high for my comfort. I am shooting for staying in a range of roughly +/- 500. To me, that is the goldilocks zone.
“If you don't know, the thing to do is not to get scared, but to learn.”

User avatar
oldcomputerguy
Posts: 2801
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods

Re: Lower Payroll Withholding - What are you doing with it?

Post by oldcomputerguy » Mon Feb 12, 2018 9:19 am

DW's workplace had not (as of her January paycheck) yet switched over to the new withholding calculation. I expect her February paycheck will show the updated withholding; if so, we'll be pushing more into our Roth accounts.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

annielouise
Posts: 205
Joined: Wed May 14, 2008 4:11 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by annielouise » Mon Feb 12, 2018 9:29 am

I don't know about other companies, but DHs corrected for 2 paychecks on his first paycheck of Feb, so it was $130 lower taxes than the next one will be. Nowhere did they say that they were doing this, but I had used the new withholding tables to calculate in advance, so I noticed it.

I hope people aren't making plans based on one paycheck!

We budget by the year, so a change per paycheck doesn't really impact our plans. We had already calculated in the new lower federal income tax into our budget.

Although, based on recent bills and shopping, I feel like it all may all go to higher prices and our budget will need to be adjusted for that. Not sure of the mechanism from an economic standpoint, but inflation seems to be really taking off in our neck of the woods.
Last edited by annielouise on Mon Feb 12, 2018 9:38 am, edited 1 time in total.

User avatar
rob
Posts: 2922
Joined: Mon Feb 19, 2007 6:49 pm
Location: Here

Re: Lower Payroll Withholding - What are you doing with it?

Post by rob » Mon Feb 12, 2018 9:32 am

I slightly increased my auto investment :-)
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

Jack FFR1846
Posts: 6812
Joined: Tue Dec 31, 2013 7:05 am

Re: Lower Payroll Withholding - What are you doing with it?

Post by Jack FFR1846 » Mon Feb 12, 2018 9:36 am

My end of 2017 had already gone beyond the max social security tax taken, so was zero. My 2018 pay check restarted social security tax so my check is smaller. So no extra investment for me.
Bogle: Smart Beta is stupid

User avatar
Toons
Posts: 12684
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Lower Payroll Withholding - What are you doing with it?

Post by Toons » Mon Feb 12, 2018 10:51 am

Lower withholding on Pension Check.
More than a "few" Senior cups of coffee at
Mcdonalds :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

User avatar
samsoes
Posts: 774
Joined: Tue Mar 05, 2013 9:12 am
Location: Northeast Rat Race

Re: Lower Payroll Withholding - What are you doing with it?

Post by samsoes » Mon Feb 12, 2018 11:02 am

Lower withholding per pay ($33). When projected to year-end, I'll owe almost $3k due to deduction changes and personal exemption elimination. So, I've changed my Federal exemptions from 4 to 0 to soften the blow in April 2019.

Thank you, Uncle Sam! :oops:
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren at Little Round Top @ Gettysburg National Military Park.)

User avatar
Clever_Username
Posts: 1033
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: Lower Payroll Withholding - What are you doing with it?

Post by Clever_Username » Mon Feb 12, 2018 11:14 am

I'm going to be the boring answer, aren't I?

Even with the old tax rates, I'd have a surplus each month that I'd be investing in my non-tax-advantaged accounts according to my asset allocation. So... I'll be allocating it according to my asset allocation.

Want to hear something really stupid? Since I (finally) have investments with distributions outside of tax advantaged space again, I am excited when the distributions show up, even though you know what I'm doing with them? Mingling them with other paycheck surplus and allocating them into my asset allocation.

As it stands, that asset allocation it's being allocated according to is a CA Muni bonds fund.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_

User avatar
mhc
Posts: 3651
Joined: Mon Apr 04, 2011 10:18 pm
Location: NoCo

Re: Lower Payroll Withholding - What are you doing with it?

Post by mhc » Mon Feb 12, 2018 11:53 am

I don't track these things that closely to notice. Also, I set my 401k contributions to 50% at the beinning of the year. My paychecks are small until that is done.

runner3081
Posts: 1254
Joined: Mon Aug 22, 2016 3:22 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by runner3081 » Mon Feb 12, 2018 12:52 pm

Nothing, sort of.

Long story short, we have a chunk of cash in savings that we are trying to "whittle" down through investments. Our current savings and expenses exceed take home pay. The small tax decrease only closed that gap a bit.

With a small pay raise (employer driven) coming next month, those funds will be added to taxable accounts, ongoing.

panhead
Posts: 261
Joined: Fri Feb 22, 2013 10:53 am

Re: Lower Payroll Withholding - What are you doing with it?

Post by panhead » Mon Feb 12, 2018 1:01 pm

I took the additional amount in my paycheck and changed my w4 to put this amount in "additional withholding" as I pay quarterlies and will still need to do so in 2018. How's that for boring?

User avatar
luminous
Posts: 59
Joined: Sat Dec 30, 2017 10:28 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by luminous » Mon Feb 12, 2018 1:09 pm

I'm investing it into our taxable brokerage according to our IPS. I'm also switching jobs soon (with a pay raise), so I'm staying conservative with the increased investments until I have confidence in the new employer's withholding and my sense for what the 2018 tax bill will look like.

User avatar
alpenglow
Posts: 590
Joined: Tue May 31, 2011 12:02 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by alpenglow » Mon Feb 12, 2018 1:11 pm

I moved withholding back up to cover partial Roth conversions.

Chadnudj
Posts: 705
Joined: Tue Oct 29, 2013 11:22 am

Re: Lower Payroll Withholding - What are you doing with it?

Post by Chadnudj » Mon Feb 12, 2018 1:13 pm

I'm planning after each paycheck to transfer the difference between what I'm getting now and what I was getting before into my taxable accounts, and investing that at my asset allocation.

This is surprise money -- and I don't want to get used to living on it and allowing my lifestyle to inflate.

JoeRetire
Posts: 574
Joined: Tue Jan 16, 2018 2:44 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by JoeRetire » Mon Feb 12, 2018 1:22 pm

Grt2bOutdoors wrote:
Mon Feb 12, 2018 9:02 am
Lower payroll withholding due to the new IRS tax tables for 2018 is resulting in higher take-home pay (for those employed).
I am investing it according to our IPS. What are you doing with yours?
When/if there is enough to be noticeable, then we'll decide what to do with it. Maybe we'll buy an extra coffee at Dunkin.
For now, nothing.

dccboone
Posts: 68
Joined: Wed Feb 04, 2015 4:02 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by dccboone » Mon Feb 12, 2018 1:26 pm

Increased retirement withholding from $2,250.00 per month to $2,291.66 to take advantage of the new ceiling for 403b annual contributions which increased from $27,000 to $27,500 with the new tax bill.

TLC
Posts: 59
Joined: Mon Feb 18, 2008 5:20 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by TLC » Mon Feb 12, 2018 1:31 pm

I had to reduce my withholding allowances by 3 in order to avoid having to pay a penalty in April 2019 for underpayment.

nolesrule
Posts: 592
Joined: Thu Feb 26, 2015 10:59 am

Re: Lower Payroll Withholding - What are you doing with it?

Post by nolesrule » Mon Feb 12, 2018 1:33 pm

Since we already have a budget surplus every month, the increased takehome will get added to that and distributed according to how we distribute the rest...

Taxable Investing
Kids long-term savings/investing
Mortgage Paydown
Charitable giving
Home improvement projects


We were already both M0 and I was withholding an additional $110 per paycheck. Under the new tables that wasn't going to be nearly enough. With the change we are also withholding an additional $100 per wife's paycheck.

User avatar
Clever_Username
Posts: 1033
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: Lower Payroll Withholding - What are you doing with it?

Post by Clever_Username » Mon Feb 12, 2018 2:36 pm

dccboone wrote:
Mon Feb 12, 2018 1:26 pm
Increased retirement withholding from $2,250.00 per month to $2,291.66 to take advantage of the new ceiling for 403b annual contributions which increased from $27,000 to $27,500 with the new tax bill.
Wait, what? I'm only contributing $18,500 to my 403(b) this year, not including the school's matching dollars. There was an increase beyond that? Even if I were over 50, the additional would be a mere $24,500. Am I eligible for whatever $3000 (or more, if you're under 50) that I'm just now finding out about?
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_

Grt2bOutdoors
Posts: 18149
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Lower Payroll Withholding - What are you doing with it?

Post by Grt2bOutdoors » Mon Feb 12, 2018 4:27 pm

Chadnudj wrote:
Mon Feb 12, 2018 1:13 pm
I'm planning after each paycheck to transfer the difference between what I'm getting now and what I was getting before into my taxable accounts, and investing that at my asset allocation.

This is surprise money -- and I don't want to get used to living on it and allowing my lifestyle to inflate.
Exactly. +1
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

MathWizard
Posts: 2821
Joined: Tue Jul 26, 2011 1:35 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by MathWizard » Mon Feb 12, 2018 4:46 pm

Clever_Username wrote:
Mon Feb 12, 2018 2:36 pm
dccboone wrote:
Mon Feb 12, 2018 1:26 pm
Increased retirement withholding from $2,250.00 per month to $2,291.66 to take advantage of the new ceiling for 403b annual contributions which increased from $27,000 to $27,500 with the new tax bill.
Wait, what? I'm only contributing $18,500 to my 403(b) this year, not including the school's matching dollars. There was an increase beyond that? Even if I were over 50, the additional would be a mere $24,500. Am I eligible for whatever $3000 (or more, if you're under 50) that I'm just now finding out about?
See

Code: Select all

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-403b-contribution-limits
you have to have 15 years of service, and your plan has to allow it, but there is a catch-up provision that allows
and extra $3000/yr for 5 years.

This is separate from the $6K/yr catch-up provision for over 50, so you could defer as much as $27K of employee
contributions in a 403b last year, and 27.5K for 2018.

BradJ
Posts: 109
Joined: Sun Jan 21, 2018 6:06 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by BradJ » Mon Feb 12, 2018 4:49 pm

My second kiddo is coming in May, so I will be throwing the extra money into a Flexible Spending Account.

Hukedonfonix4me
Posts: 106
Joined: Thu Oct 13, 2016 3:00 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by Hukedonfonix4me » Mon Feb 12, 2018 6:06 pm

Our household captured the difference in take home by increasing our automatic online savings account contributions each payday.


*Retirement accounts (401k, Roth IRA, HSA) already set to IRS maximum for 2018
"While some mutual fund founders chose to make billions, he chose to make a difference." | -The Bogleheads' Guide to Investing

thangngo
Posts: 914
Joined: Sun Feb 26, 2017 2:08 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by thangngo » Mon Feb 12, 2018 6:17 pm

Grt2bOutdoors wrote:
Mon Feb 12, 2018 9:02 am
Lower payroll withholding due to the new IRS tax tables for 2018 is resulting in higher take-home pay (for those employed).
I am investing it according to our IPS. What are you doing with yours?
It pushed me to underwithhold territory (about 4k under safe harbor) for this year. I'm letting it ride until Oct/Nov to catch-up withholding. It's nice to have extra cashflow to put into traveling fund sitting in 1.5% online saving. It might not be much, i.e. $40-50 interest income. But it's $40 taco bell for me for the year.

lstone19
Posts: 115
Joined: Fri Nov 03, 2017 3:33 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by lstone19 » Mon Feb 12, 2018 6:41 pm

Since we need to make estimated payments to reach the 110% safe-harbor amount, just setting it aside for the now larger estimated payments we’ll need to make.

User avatar
CAsage
Posts: 931
Joined: Sun Mar 27, 2016 6:25 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by CAsage » Mon Feb 12, 2018 6:43 pm

I will bank it, so that when they cut Social Security benefits in a few years to deal with rising interest rates and a ballooning national deficit I can still buy beans. This cut will not benefit me in the long run....
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

User avatar
Clever_Username
Posts: 1033
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: Lower Payroll Withholding - What are you doing with it?

Post by Clever_Username » Mon Feb 12, 2018 6:51 pm

MathWizard wrote:
Mon Feb 12, 2018 4:46 pm
Clever_Username wrote:
Mon Feb 12, 2018 2:36 pm
dccboone wrote:
Mon Feb 12, 2018 1:26 pm
Increased retirement withholding from $2,250.00 per month to $2,291.66 to take advantage of the new ceiling for 403b annual contributions which increased from $27,000 to $27,500 with the new tax bill.
Wait, what? I'm only contributing $18,500 to my 403(b) this year, not including the school's matching dollars. There was an increase beyond that? Even if I were over 50, the additional would be a mere $24,500. Am I eligible for whatever $3000 (or more, if you're under 50) that I'm just now finding out about?
See

Code: Select all

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-403b-contribution-limits
you have to have 15 years of service, and your plan has to allow it, but there is a catch-up provision that allows
and extra $3000/yr for 5 years.

This is separate from the $6K/yr catch-up provision for over 50, so you could defer as much as $27K of employee
contributions in a 403b last year, and 27.5K for 2018.
Sweet, thanks. I don't have 15 years of service and I'm at a private school, so it doesn't look like I'm eligible. Still, it's good to know about!
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_

awval999
Posts: 1065
Joined: Fri Apr 08, 2011 10:17 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by awval999 » Mon Feb 12, 2018 7:17 pm

Increasing amount into student loans.

Goal: Finish by December!

Nearly A Moose
Posts: 821
Joined: Fri Apr 22, 2016 5:28 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by Nearly A Moose » Tue Feb 13, 2018 9:58 am

thangngo wrote:
Mon Feb 12, 2018 6:17 pm
Grt2bOutdoors wrote:
Mon Feb 12, 2018 9:02 am
Lower payroll withholding due to the new IRS tax tables for 2018 is resulting in higher take-home pay (for those employed).
I am investing it according to our IPS. What are you doing with yours?
It pushed me to underwithhold territory (about 4k under safe harbor) for this year. I'm letting it ride until Oct/Nov to catch-up withholding. It's nice to have extra cashflow to put into traveling fund sitting in 1.5% online saving. It might not be much, i.e. $40-50 interest income. But it's $40 taco bell for me for the year.
That's a lot of taco Bell...
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

User avatar
cockersx3
Posts: 128
Joined: Sun Apr 17, 2016 3:55 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by cockersx3 » Tue Feb 13, 2018 1:34 pm

CAsage wrote:
Mon Feb 12, 2018 6:43 pm
I will bank it, so that when they cut Social Security benefits in a few years to deal with rising interest rates and a ballooning national deficit I can still buy beans. This cut will not benefit me in the long run....
Yup, I'm worried about this too. Nothing is free. We'll see how it all plays out I guess...

In my case, I've already increased my bimonthly withdrawal from my bank over to our Vanguard brokerage account. (We already max out all of our available tax-advantaged space.) The increase Vanguard pull amount is just slightly higher than the "extra" money we get in tax withholding savings, plus the amount of my salary increase for the year. For our family it's important to remove the money to avoid the temptation to inflate our lifestyle.

rterickson
Posts: 91
Joined: Fri May 01, 2015 3:48 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by rterickson » Tue Feb 13, 2018 4:49 pm

I'm saving it to pay the state and local taxes (California) that I'm no longer able to deduct.

alfaspider
Posts: 1290
Joined: Wed Sep 09, 2015 4:44 pm

Re: Lower Payroll Withholding - What are you doing with it?

Post by alfaspider » Tue Feb 13, 2018 4:52 pm

Nothing specific. Any excess funds beyond my general spending budget and tax advantaged space gets shoveled into the taxable account.

Withholding itself doesn't make much of a difference to me, as I aim to write the biggest check possible at tax time without incurring a penalty for under withholding. There's no reason to give the government an interest-free loan.

Post Reply