Increase 401k or reduce fed exemptions |
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TonyLS
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 25 Sep 2012
Location: Boston |
Increase 401k or reduce fed exemptions |
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I end up paying federal tax every tax year above and beyond the weekly payroll deductions. In order to minimize this amount that I have to pay can I increase my 401k contribution instead of decreasing my federal exemptions? Shouldn't this reduce my tax liability while saving for retirement? I'm currently not at the limit for 401k contributions, I'm at the tuition and wedding stage of my life with my kids.
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Tue Sep 25, 2012 2:45 pm |
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clydewolf
Senior Member
Cash: $ 50.25
Posts: 248
Joined: 27 May 2012
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Re: Increase 401k or reduce fed exemptions |
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quote: Originally posted by TonyLS I end up paying federal tax every tax year above and beyond the weekly payroll deductions. In order to minimize this amount that I have to pay can I increase my 401k contribution instead of decreasing my federal exemptions? Shouldn't this reduce my tax liability while saving for retirement? I'm currently not at the limit for 401k contributions, I'm at the tuition and wedding stage of my life with my kids.
TonyLS,
Consider yourself lucky or smart, It is better for you to pay some tax than to have paid too much and get a large refund.
If you can afford it the increased 401k contribution will lower your taxable income today.
It will also cause a decrease in your take home pay.
Then in the future when that money is distributed from your 401k (or rolled over IRA), taxes will need to paid.
If you want to change your withholding, you can use one of these calculators:
- at the IRS: http://www.irs.gov/Individuals/IRS-Withholding-Calculator
- at paycheck city: http://www.paycheckcity.com/calculator/w4assistant.html;jsessionid=97D975D9CAA860F3D6FACAC767A73E63?execution=e1s1
I noticed PayCheckCity there is a 401k calculator: http://www.paycheckcity.com/calculator/401k/us/alabama/401kcalculator.html
Without knowing much much more about your budget, it is difficult to say which way is the best for you.
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Tue Sep 25, 2012 10:17 pm |
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JessicaL
New Member
Cash: $ 0.80
Posts: 3
Joined: 11 Dec 2017
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I had same problem, thanks for helpful tips
tellpizzahut.com
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Mon Dec 11, 2017 3:05 pm |
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