Retirement Contribution Effects on Your Paycheck

An employer sponsored retirement savings account could be one of your best tools for creating a secure retirement. It provides two important advantages. First, all contributions and earnings are tax-deferred. You only pay taxes on contributions and earnings when the money is withdrawn. Second, many employers provide matching contributions to your account, which can range from 0% to 100% of your contributions. Use this calculator to see how increasing your contributions to a 401(k), 403(b) or 457 plan can affect your paycheck as well as your retirement savings. This calculator has been updated to use the new withholding schedules for 2011.

Definitions

Gross pay This is your gross pay, before any deductions, for the pay period. Please enter a dollar amount from $1 to $1,000,000. Pay period This is how often you are paid. Your selections are: Weekly (52 paychecks per year), Every other week (26 paychecks per year), Twice a month (24 paychecks per year), and Monthly (12 paychecks per year). Filing status This is your income tax filing status. The choices are "Single" and "Married". Choose "Married" if you are married or file as "head of household". Choose "Single" if you file your taxes as a single person or if you are married but file separately. Number of allowances When your Federal income tax withholdings are calculated, you are allowed to claim allowances to reduce the amount of the Federal income tax withholding. In 2011, each allowance you claim is equal to $3,700 of income that you expect to have in deductions when you file your annual tax return. The number of allowances you should claim depends largely on the number of dependents you have and your itemized deductions. This calculator allows from 0 to 99 allowances. State and local taxes This is the percentage that will be deducted for state and local taxes. We take your gross pay, minus $3,700 per allowance, times this percentage to calculate your estimated state and local taxes. Please note, this calculator can only estimate your state and local withholdings. Pre-tax deductions Enter any payroll deductions made by your employer that are made with pre-tax income. This might include your health insurance, life insurance among other pre-tax deductions. Post-tax deductions Enter any payroll deductions made by your employer that are made with after tax income. Post-tax reimbursements Enter any reimbursements made by your employer that are after tax. Year to date income Income from your employer that you have been paid during the current year, before the current payroll period. We use this amount to determine if you are still required to pay FICA OASDI for the current payroll period. FICA OASDI FICA Old Age Survivors and Disability Insurance. For 2011, FICA OASDI is calculated as your gross earnings times 4.2%. This is a one year reduction from 6.2%, which will return in 2012. Please note that this calculator does not make any assumptions as to the total FICA OASDI paid for the current year. For 2011, incomes over $106,800 that have already had the maximum FICA OASDI amount of $4485.60 withheld will not have additional FICA OASDI withholdings. FICA Medicare FICA Medicare is calculated as the gross earnings times 1.45%. Unlike FICA OASDI, there is no annual limit to FICA Medicare deductions. Federal tax withholding calculations Federal income tax withholdings were calculated by: Multiplying taxable gross wages by the number of pay periods per year to compute your annual wage. Subtracting the value of allowances allowed (for 2011, this is $3,700 multiplied by withholding allowances claimed). Determining your annual tax by using the tables below (single and married rates, respectively). Dividing the amount of tax by the number of pay periods per year to arrive at the amount of federal withholding tax to be deducted per pay period. Single Withholding Rates* Annual taxable income between these amounts Annual withholding Withhold additional % of income over this amount $0.00 $2,100.00 $0.00   $2,100.00 $10,600.00 $0.00 plus 10% of income over $2,100.00 $10,600.00 $36,600.00 $850.00 plus 15% of income over $10,600.00 $36,600.00 $85,700.00 $4,750.00 plus 25% of income over $36,600.00 $85,700.00 $176,500.00 $17,025.00 plus 28% of income over $85,700.00 $176,500.00 $381,250.00 $42,449.00 plus 33% of income over $176,500.00 $381,250.00 (no limit) $110,016.50 plus 35% of income over $381,250.00 *Source: http://www.irs.gov/pub/irs-pdf/n1036.pdf Notice 1036 (Rev. December 2010) Income Tax Withholding Tables for 2011 Married Withholding Rates* Annual taxable income between these amounts Annual withholding Withhold additional % of income over this amount $0.00 $7,900.00 $0.00   $7,900.00 $24,900.00 $0.00 plus 10% of income over $7,900.00 $24,900.00 $76,900.00 $1,700.00 plus 15% of income over $24,900.00 $76,900.00 $147,250.00 $9,500.00 plus 25% of income over $76,900.00 $147,250.00 $220,200.00 $27,087.50 plus 28% of income over $147,250.00 $220,200.00 $387,050.00 $47,513.50 plus 33% of income over $220,200.00 $387,050.00 (no limit) 102,574.00 plus 35% of income over $387,050.00 *Source: http://www.irs.gov/pub/irs-pdf/n1036.pdf Notice 1036 (Rev. December 2010) Income Tax Withholding Tables for 2011 Plan type Choose the type of plan your employer sponsors. The choices are 401(k), 403(b) or 457. Your plan choice will not affect the calculations, it is only used to label the generated results. Plan withholding This is the percent of your gross income you put into a taxable deferred retirement account such as a 401(k), 403(b) or 457. While increasing your retirement account savings does lower your take home pay, it also lowers your Federal income tax withholdings. The impact on your paycheck might be less than you think. We compare the amount you enter here to the minimal participation rate of 1%. While your plan may not have a deferral percentage limit, this calculator limits deferrals to 80% to account for FICA (Social Security and Medicare) taxes. Please note that your plan's contributions may be limited to less than 80% of your income. Check with your plan administrator for details. For 2011 the maximum contribution to a 401(k), 403(b) or 457 remains unchanged at $16,500 per year for individuals under 50 and $22,000 for individuals age 50 and over. Current age Your current age. Age of retirement Age you wish to retire. This calculator assumes that the year you retire, you do not make any contributions. So if you retire at age 65, your last contribution happened when you were actually 64. Annual contribution limits Your total contribution for one year is based on your annual salary times the percent you contribute. However, your annual contribution is also subject to certain maximum total contributions per year. The annual maximum for 2011 is $16,500. If you are age 50 or over, a "catch-up" provision allows you to contribute additional $5,500 into your account. It is also important to note that employer contributions do not affect an employee's maximum annual contribution limit. The catch-up amount is indexed for inflation in increments of $500. It is important to note that some employees are subject to another form of contribution limitations. Employees classified as "Highly Compensated" may be subject to contribution limits based on their employer's overall participation. If you expect your salary to be $110,000 or more in 2011 or was $110,000 or more in 2010, you may need to contact your employer to see if these additional contribution limits apply to you.