So....
If I put $10 extra in a 403b and I'm in the 15% tax bracket, it saves me $1.50 in taxes (therefore I "make" 15%?)
That's interesting! I never knew that.
If I put $10 extra in a 403b and I'm in the 15% tax bracket, it saves me $1.50 in taxes (therefore I "make" 15%?)
Category | Monthly | Comments | Annual |
Salary/Wages | $5,000 | $60,000 | |
401(k) / 403(b) / TSP / etc. | $150 | Room to increase? | $1,800 |
Employer Match | $300 | $3,600 | |
Income subject to IRS tax | $4,850 | $58,200 | |
Federal Total Inc. | $4,850 | $58,200 | |
Federal tax | -$22 | 2015 rates, MFJ, stand. ded., 5 exempt. | -$263 |
State/City tax | $97 | Guess, using 2.00% * Fed. AGI | $1,164 |
Soc. Sec. | $310 | Assumes 2 earners paying | $3,720 |
Medicare | $73 | $870 | |
Total income taxes | $458 | $5,491 |
Filing Status | 2 | 1=S, 2=MFJ | |
# of earners | 2 | ||
Total Income | $58,200 | ||
Std. Deduct. | $12,600 | ||
Act. Deduct. | $12,600 | ||
# Exempt. | 5 | ||
Exemption | $20,000 | ||
AGI | $58,200 | ||
Taxable | $25,600 | ||
Tax | $2,918 | ||
Savers' credit | $180 | ||
Tax after n-r credit | $2,738 | ||
# Children <17 | 3 | ||
Child Tax Cred. | $3,000 | ||
EIC | $0 | ||
Net Tax | -$263 |
Category | Monthly | Comments | Annual |
Salary/Wages | $5,000 | $60,000 | |
401(k) / 403(b) / TSP / etc. | $158 | Room to increase? | $1,900 |
Employer Match | $300 | $3,600 | |
Income subject to IRS tax | $4,842 | $58,100 | |
Federal Total Inc. | $4,842 | $58,100 | |
Federal tax | -$24 | 2015 rates, MFJ, stand. ded., 5 exempt. | -$288 |
State/City tax | $97 | Guess, using 2.00% * Fed. AGI | $1,162 |
Soc. Sec. | $310 | Assumes 2 earners paying | $3,720 |
Medicare | $73 | $870 | |
Total income taxes | $455 | $5,464 |
Filing Status | 2 | 1=S, 2=MFJ | |
# of earners | 2 | ||
Total Income | $58,100 | ||
Std. Deduct. | $12,600 | ||
Act. Deduct. | $12,600 | ||
# Exempt. | 5 | ||
Exemption | $20,000 | ||
AGI | $58,100 | ||
Taxable | $25,500 | ||
Tax | $2,903 | ||
Savers' credit | $190 | ||
Tax after n-r credit | $2,713 | ||
# Children <17 | 3 | ||
Child Tax Cred. | $3,000 | ||
EIC | $0 | ||
Net Tax | -$288 |
Or more. See the two cases below. The first has $1800 in 403b contribution, and the second has $1900. In addition to the $15 saved on federal tax (and whatever on state: $2 in this example), one gets an extra $10 from the saver's credit. Thus one actually saves 25% (plus state) of the extra $100 contribution, making it even more likely that a traditional plan will be better than a Roth.
Doesn't the saver's credit apply equally to Roth and Traditional, IRA and 403(b)?Depends on the definition of "apply". From http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Retirement-Savings-Contributions-Credit-%28Saver%E2%80%99s-Credit%29:
The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income (reported on your Form 1040 or 1040A).