The Middle Class Tax Relief and Job Creation Act of 2012 extended the reduced payroll tax amount you pay in 2012 from 6.2% to 4.2%.*
And the difference—a 2% increase in your take-home pay—is yours to consider investing in your workplace retirement plan.
Increasing your contribution rate by 2% may not have a big impact on your paycheck—but it could have a big impact on your potential retirement savings.
Use our paycheck calculator to see how.
*Payroll tax of 2% represents the Old-Age, Survivors, and Disability Income portion of wages up to $110,100 for 2012. A different amount applies to self-employed individuals.
The amount of income tax you save depends on your tax bracket and how much you put into your plan account. In this hypothetical example, the federal tax shown reflects the standard withholding based on 2012 tax brackets: $30,000 = 15%. Exemptions, itemized deductions, and state taxes are not reflected.
Hypothetical data are for illustrative purposes only and are not intended to represent past or future performance of any specific investment. The balances shown assume a biweekly pay period, an employee in his or her 30s with a $30,000 yearly salary and plans to retire at age 62, and annually compounded interest. This example assumes a hypothetical average rate of return of 8%, reinvestment of dividends and capital gains, and no current taxes paid on earnings in a retirement plan account. Schwab does not provide tax or legal advice.
If you make Roth 401(k) contributions, the benefits of pre-tax contributions are not applicable.
Schwab Retirement Plan Services, Inc. provides recordkeeping and related services with respect to retirement plans.
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