- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
.
Posted on 6/24/15 at 11:59 am
Posted on 6/24/15 at 11:59 am
(no message)
This post was edited on 8/29/17 at 1:47 pm
Posted on 6/24/15 at 12:06 pm to CQQ
quote:
So say my gross is $4000 per check, $200 is going towards my 401K.
My suggestion would be to check the math on your check of all the deductions.
Your example doesn't necessarily mean that the 5% isn't coming out after taxes. It just means they figured the 5% figure on the gross pay amount, but they could be deducting 5% of your gross pay from the net pay.
Posted on 6/24/15 at 12:28 pm to HoustonTiger2008
Ah, I think I got it. The 5% going into my 401K is definitely 5% of my gross pay but my taxable gross is my gross less what I put in my 401K.
This is what you were saying, right?
This is what you were saying, right?
Posted on 6/24/15 at 12:31 pm to CQQ
quote:
The 5% going into my 401K is definitely 5% of my gross pay
Yep.
quote:
but my taxable gross is my gross less what I put in my 401K.
Well this would make it a traditional 401k contribution. Deducting the amount you contribute before you pay taxes on the money.
What I am saying is maybe on your check they take the 5% out of your base (gross) salary and then take out taxes and insurance and arrive at your "net" pay, but then they deduct the 5% of your gross from that amount. That would be a Roth 401k contribution in that it was deducted from your paycheck after you paid taxes.
Posted on 6/24/15 at 12:48 pm to CQQ
quote:
The 5% is coming out of my gross pay, not my gross pay less taxes.
Your 401k contribution should be based on gross pay, not net pay.
This amount is simply deposited into your 401k account as a direct deposit. It should still be accounted for in your taxable income calculation, and taxes will assume this extra income, thereby reducing your net pay.
The same amount would go into your 401k if you were using a traditional 401k, but your taxes would simply be less making your net pay higher.
Posted on 6/24/15 at 1:45 pm to LSUtigerME
I might have missed something, but the roth account will be seperate from the 401k account.
Posted on 6/24/15 at 3:04 pm to Gorilla Ball
Roth account is not separate in his example.
You can choose a Roth 401k or Traditional 401k.
Roth 401k you pay tax now and it is tax free later.
ex. salary 50k you save 5% so you save $2500 for the year. It is taxed $625 in the 25 percent tax bracket.
Later when you withdraw whatever amount it is tax free after 59 1/2 years old.
Traditional 401k you don't pay tax now it is deferred.
When you withdraw it is taxed as income.
So it you make 35k from soc security and you take out 5k from trad 401k you are taxed on 40k net income.
You can choose a Roth 401k or Traditional 401k.
Roth 401k you pay tax now and it is tax free later.
ex. salary 50k you save 5% so you save $2500 for the year. It is taxed $625 in the 25 percent tax bracket.
Later when you withdraw whatever amount it is tax free after 59 1/2 years old.
Traditional 401k you don't pay tax now it is deferred.
When you withdraw it is taxed as income.
So it you make 35k from soc security and you take out 5k from trad 401k you are taxed on 40k net income.
Posted on 6/24/15 at 3:37 pm to CQQ
The 401k amount will be based off your gross pay, regardless whether it's for a traditional or Roth 401k.
The difference is when it comes out of your check. Before taxes or after taxes
The difference is when it comes out of your check. Before taxes or after taxes
Posted on 6/24/15 at 3:45 pm to CQQ
This is because the systems aren't smart enough to know your tax rate. All they can reliably count on is your gross pay. You have to make the tax correction calculation on your own. For example:
- You want to put 10% in retirement (5% in 401k, 5% in Roth)
- Your gross pay is $1000/check
- 5% to your 401k is $50
- 5% to your Roth is going to be 5%x(1-tax%) since it needs to have taxes removed and is not the same as 5% going into traditional 401k.
- Lets say you are taxed at 20%. Your 5% becomes 4% (5%*(1-.20)=4%.
- Set your Roth witholding to 4% and the numbers would be like you are expecting.
This is how I have to do it in the systems at my work, anyway.
- You want to put 10% in retirement (5% in 401k, 5% in Roth)
- Your gross pay is $1000/check
- 5% to your 401k is $50
- 5% to your Roth is going to be 5%x(1-tax%) since it needs to have taxes removed and is not the same as 5% going into traditional 401k.
- Lets say you are taxed at 20%. Your 5% becomes 4% (5%*(1-.20)=4%.
- Set your Roth witholding to 4% and the numbers would be like you are expecting.
This is how I have to do it in the systems at my work, anyway.
Posted on 6/24/15 at 6:55 pm to LSU9102
quote:
You can choose a Roth 401k or Traditional 401k.
Can you chose both?
My wife's company just added at Roth 401K, we have been putting 25% of her salary into a traditional 401K, can I split the difference and put 10% into a Roth401k & 15% into the traditional?
Posted on 6/24/15 at 7:23 pm to TigerintheNO
quote:
Can you chose both?
Sure. The contribution limit applies to combined. Also, any company match will be pre-tax by default.
Do you max an external Roth account?
It's a good idea for tax diversity, but if contributing to Roth because of the tax advantages, why not go all in on the Roth? The company match provides some diversity.
Posted on 6/25/15 at 7:16 am to LSUtigerME
quote:
It's a good idea for tax diversity, but if contributing to Roth because of the tax advantages, why not go all in on the Roth? The company match provides some diversity.
I would throw one caveat on that suggestion. Make sure to get the details. One of my previous companies for whatever reason would only match money put in a traditional 401k and not what was put in a Roth 401k. They said it was something to do with how their electronic system worked but whatever it was, it was a key detail that was critically important.
Popular
Back to top
Follow TigerDroppings for LSU Football News