If you're hesitant to begin saving in your 401(k) plan because you are worried about how it will affect your paycheck, you're not alone. The Ubiquity Paycheck Calculator can demonstrate the effect of increasing contributions on your take-home pay–and how it may impact your financial future.
Complete the fields below to see how your 401(k) contribution change might affect your paycheck amount. Once you have completed your information you can print or email your report to keep for your records.
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When you save in a traditional 401(k), you deduct a portion of your pay and have it automatically deposited into your 401(k) account each pay period as pre-tax contributions. This means the money you invest is not included in your earned income when calculating income tax owed for the year. The tax liability on these saved dollars is deferred until you decide to withdraw funds from the 401(k) at retirement age. Most savers who choose this pre-tax option benefit because it lowers their taxable income during the years they are contributing to their 401(k), allowing them to pay less income tax. The net benefit is that you save for retirement and reduce your tax burden while you are working, however when you retire and start to withdraw from your 401(k), you will have to pay taxes on these funds.
An advantage of using your workplace retirement plan is that unlike an IRA, not all money contributed to your 401(k) comes from your paycheck. Many companies choose to provide matching contributions to your account, meaning your employer contributes a certain amount toward your retirement savings, based on the amount of your own annual contribution.
Curious how increasing your contributions to a 401(k) plan can affect your paycheck as well as your retirement savings? Answer a few questions below to begin.
Withholding schedules, rules and rates are from “IRS Publication 15” and “IRS Publication 15T”. This calculator uses the redesigned W-4 created to comply with the elimination of exemptions in the Tax Cuts and Jobs Act (TCJA).