Putting More Money in Your Wallet – Duncan Financial Group
Your Plan Fiduciary Must-Do and Should-Do Lists
March 28, 2023
As Volatility Increases, So Does Retirement Worry
March 31, 2023
Putting More Money in Your Wallet

Human hand holding wallet with american money dollars close up. Color image in horizontal orientation

Putting More Money in Your Wallet

Did you know that how you save your money can affect your bottom line? For instance, if you’re eligible, placing a portion of your pre-tax earnings into your company’s qualified retirement plan (e.g., a 401(k) plan) can increase your disposable income in addition to providing you with the opportunity to save for retirement. Here’s a hypothetical example of how it works.

Bill Walsh is a single taxpayer who has an annual salary of $50,000. He consistently saves $5,000 per year and places it in a bank account. Recently, he became eligible to contribute to his company’s 401(k) plan. Now, instead of making after-tax contributions to his savings account, Bill decides to make a pre-tax contribution of $5,000 into his 401(k). As a result, Bill reduces his taxable income to $45,000. Assuming a 25% federal income tax rate, such a strategy will give Bill $1,350 more in after-tax income. The following chart shows the details.