401k contribution = income tax reduction... help

[J.Apple902]

Here is my 2 week paycheck:

Gross Pay 2080
fed -248.44
ss -83.14
medicare -28.7
state -91.09
benefits -100.5

I don't get my $0.50 for each $1.00 til 6% 401k match for four more months so I haven't actually began investing in my 401k. However, I know that contributing to my 401k will reduce my income taxes - but I am wondering how much? If I decrease my income by 6% or $124.8 per paycheck, what will my taxes look like then?

If the hit to my net income isn't a ton, I'm going to begin investing even before I can receive the match.

Thanks!

[jpg7n16]

401k contributions have no impact on SSI, Medicare, or benefits. So those categories will remain the same.

I'll be glad to help a bit, but you are way too focused on the short term here. The main reason to contribute to a 401k is that you are saving towards retirement, cause no one else will save for you.

You make $54k/year. The recommended amount to save for retirement, is shooting for 15-20% over time. Thats about $8000-10,800/year. Start a 6% sure, but eventually, you'll want to raise that up to 10 or 15 or more.



The very short answer is, when you contribute 6% of your income to the 401k, it depends on your Tax bracket. If you file single, you'll likely be in the 25% bracket federal, and I don't know state. But take those brackets times $3244.8 (aka the amount you contributed) and that's how much you'll save. Likely 811.2/year on federal and maybe a couple hundred extra on state?

Do you get a refund each year?

[kork13]

This is one question that actually has a great online calculator available (for free): PayCheckCity's calculator is almost dead-on accurate for my paycheck. You should check it out, it'll tell you exactly what you can expect your paychecks to look like.

[J.Apple902]

just spoke to to a co worker. We make the same, have the same deductions (2), have the same benefits, etc, he just puts in 6% or $125 each paychack for 401k. His taxes are reduced by about $33, so therefore he sacrifices $92 to get $125 - plus the match which I cannot get yet.

This is the answer I was looking for. How much will my state / fed taxes drop if I invest pre-taxed income?

Thanks!