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Question about catch up contributions for those over 50
Posted on 11/7/22 at 6:41 pm
Posted on 11/7/22 at 6:41 pm
I'm over 50 and have been contributing the maximum $19,500 pre-tax into my 401K. I just looked it up and see that the 2022 maximum is $20,500 and I can also contribute an additional $6,500 for being over 50. Let's say the top of my tax bracket is 32%. Unless there is some type of weird IRS math, I assume by contributing the additional $7,500 ($1,000 increase + $6,500 catch up allowance), I will save 32% of $7,500 in taxes or $2,400. Am I oversimplifying this?
4
Posted on 11/7/22 at 7:00 pm to Ramblin Wreck
In your position maxing out your allowable traditional 401k contributions allows you to reduce your taxable income by $27,000 in 2022 and $30,000 in 2023
Posted on 11/7/22 at 7:34 pm to Ramblin Wreck
Yes. It could also drop you into the lower bracket depending how far you are over in terms of gross income for the 32% bracket.
Posted on 11/8/22 at 10:43 am to Ramblin Wreck
Not really oversimplifying.
Just think of it as it's not added to your income (or, conversely, taken out of your income). However, having said that, it's still taxed for FICA/FUTA purposes.
Also, you can add your state tax rate to see your "savings".
The withholding tables don't really take this into consideration, so in the end, it typically just means a much larger refund at the end of the year.
Just think of it as it's not added to your income (or, conversely, taken out of your income). However, having said that, it's still taxed for FICA/FUTA purposes.
Also, you can add your state tax rate to see your "savings".
The withholding tables don't really take this into consideration, so in the end, it typically just means a much larger refund at the end of the year.
Posted on 11/8/22 at 12:22 pm to Ramblin Wreck
quote:
Am I oversimplifying this?
Nope. You got it.
Posted on 11/9/22 at 9:48 am to notsince98
Good info y'all, my wife needs to read this 100 times till she gets it.
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