Author Topic: Confused about CalPERS contribution  (Read 4615 times)

Cherie

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Confused about CalPERS contribution
« on: August 15, 2015, 03:36:27 PM »
As a new employee I was informed I will become a member of CalPERS. My employer told me I have to contribute 8.96% of my salary per month (they contribute 10.93%). He told me I "won't feel it because it is 'pre-tax.'" I don't understand this. It is calculated off my gross, which is over $50k. So, this turns out to be about $373 per month? That is a big chunk of my paycheck. Am I figuring this wrong? Why did he say "pre-tax?" Thanks.

coffeehound

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Re: Confused about CalPERS contribution
« Reply #1 on: August 15, 2015, 05:00:53 PM »
Welcome to CalPERS.

Pre-tax means that your retirement contributions are deducted from your pay before your federal and state income taxes are assessed. Pre-tax is another way of saying, this will reduce your taxable income.

So, if your gross pay were $4,000 per month:
$4,000-$373 = $3,627.  You would then pay income taxes on the $3,627.

If you're a new employee, this is an EXCELLENT time to enroll in the 403(b), and reduce your taxable income further, while growing your 'stache!

forummm

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Re: Confused about CalPERS contribution
« Reply #2 on: August 17, 2015, 11:30:16 AM »
Welcome to CalPERS.

Pre-tax means that your retirement contributions are deducted from your pay before your federal and state income taxes are assessed. Pre-tax is another way of saying, this will reduce your taxable income.

So, if your gross pay were $4,000 per month:
$4,000-$373 = $3,627.  You would then pay income taxes on the $3,627.

If you're a new employee, this is an EXCELLENT time to enroll in the 403(b), and reduce your taxable income further, while growing your 'stache!
Or a 457 plan if you have one.  One of the best things out there for people who want to retire early!

Or both!