Investing for Your Future - Advantages

Gross Earnings
Monthly Contribution (4%)
Taxable Income

Federal
State/Local*
Social Security/Medicare Taxes**

No Savings
$2,000
-0-
$2,000

$160
$60
$153

Savings
$2,000
$80
$1,920

$148
$58
$153

Janice is contributing 4% of her annual income, $80 per month. Her savings contribution is deducted from gross wages before they are taxed, making her total taxable wages lower.

Although Janice is saving $80, her take-home pay is reduced by only $65. It costs her only $65 to actually save $80. Her total annual savings of $960 really only costs Janice $780.

*Calculation uses 6% state taxes. Some states with income tax do not permit contributions to be state tax-deferred.
**Social Security/Medicare Taxes are calculated on your gross earnings.