McMillion Financial Group
your partner in retirement planning
your partner in retirement planning
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The Power of Pre-Tax Contributions
Emily and Kent both earn $2000 per month, and both save $200 each month towards their
retirement. However, Emily has the opportunity to invest in a 403(b) plan while Kent's retirement
contributions are made to an after-tax savings program.
Paycheck Analysis
KENT EMILY
month. Under current income tax rates, approximately $500 would go to the federal government,
$100 would be withheld for state taxes and FICA would be about another $153. As Kent is saving
$200 a month for retirement, he would be left with $1,047 in spendable income.
Since Emily contributes $200 to a 403(b) retirement savings plan, her taxable income is only
$1800. As such, her taxes will be less than Kent's with about $450 going to the federal
government, $90 withheld for the state and FICA remaining at $153. Since Emily has reduced her
taxable income by contributing to her 403(b), her spendable income is $1,107.
As you can see, even though Emily and Kent are each saving the same amount for retirement,
Emily is able to take home $60 more dollars per pay period because she is investing on a pre-tax
basis in her 403(b) account.
Emily and Kent both earn $2000 per month, and both save $200 each month towards their
retirement. However, Emily has the opportunity to invest in a 403(b) plan while Kent's retirement
contributions are made to an after-tax savings program.
Paycheck Analysis
KENT EMILY
- After-Tax 403(b)
Gross Earnings $2000 $2000
Retirement Savings 200 200
Taxable Income 2000 1800
Federal Withholding 500 450
State Withholding 100 90
FICA 153 153
Net take home after savings 1047 1107
Assumes a 5% state and 25% federal tax rate.
month. Under current income tax rates, approximately $500 would go to the federal government,
$100 would be withheld for state taxes and FICA would be about another $153. As Kent is saving
$200 a month for retirement, he would be left with $1,047 in spendable income.
Since Emily contributes $200 to a 403(b) retirement savings plan, her taxable income is only
$1800. As such, her taxes will be less than Kent's with about $450 going to the federal
government, $90 withheld for the state and FICA remaining at $153. Since Emily has reduced her
taxable income by contributing to her 403(b), her spendable income is $1,107.
As you can see, even though Emily and Kent are each saving the same amount for retirement,
Emily is able to take home $60 more dollars per pay period because she is investing on a pre-tax
basis in her 403(b) account.
Securities offered through NEXT Financial Group, Inc. member FINRA and SIPC 2500 Wilcrest, Suite 620,
Houston TX 77042 (877) 876-6398, www.nextfinancial.com
Before investing in a mutual fund or variable annuity, consider its investment objectives, risks, charges and
expenses carefully.
_______________________________________________________________________________
Copyright 2008 McMillion Financial Group LLC. All rights reserved. Revised May 5, 2008.
______________________________________________________________________________
Houston TX 77042 (877) 876-6398, www.nextfinancial.com
Before investing in a mutual fund or variable annuity, consider its investment objectives, risks, charges and
expenses carefully.
_______________________________________________________________________________
Copyright 2008 McMillion Financial Group LLC. All rights reserved. Revised May 5, 2008.
______________________________________________________________________________
Branch Office: 3022 S National Avenue, Suite 326, Springfield MO 65804
Phone (417) 889-9003 E-mail: kmcmillion@mcmillionfinancialgroup.com
McMillion Financial Group LLC is not an affiliate of Next Financial Group LLC.
Phone (417) 889-9003 E-mail: kmcmillion@mcmillionfinancialgroup.com
McMillion Financial Group LLC is not an affiliate of Next Financial Group LLC.
