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Having my cake and eating it too with the new tax law

February 2nd, 2018 at 12:12 pm

My January 31 paycheck used the updated withholding tables, so I compared the Federal withholding on that check with the withholding on January 15 and found more than a $60 difference. I played around with the calculation in 1% (of gross salary) increments and figured that I could increase my retirement contributions by about $45 per pay period and still have an extra $15 per paycheck in my take-home pay, so I arranged for that change to occur starting this month. Over the course of the rest of the year, that's nearly an extra $2,000 in retirement savings, a $2,000 decrease in federally taxable income (which at the marginal 22% bracket means $435 less tax due next April, and an extra $330 in my pocket to spend. Win/win all around!

I also posted a blog post about this on our company's website at http://www.joycepaynepartners.com/client-insights/the-new-tax-law.

6 Responses to “Having my cake and eating it too with the new tax law”

  1. FrugalTexan75 Says:

    Nice!

  2. ceejay74 Says:

    Dido, will the withholding change have hit everyone’ payrolls by now? Both NT and I had other changes to our last paycheck (I got a raise, his changed to biweekly from bimonthly), so I can’t tell.

  3. Dido Says:

    No, the Treasury is urging companies to have the change instituted by Feb. 15, so some will have changed but some won't.

    That's frustrating not to be able to tell the difference along with the other changes. You can ask whoever is in charge of your HR if/when the change will be incorporated.

  4. rob62521 Says:

    Yay!

  5. PatientSaver Says:

    Were you possibly the one who recommended PersonalCapital.com for tracking one's finances? I was tempted to try it, but I'm having trouble getting past the part where you SHARE YOUR ID/PWs to all your brokerage and bank accounts with them.

  6. Dido Says:

    PS, I do use Personal Capital for tracking my money, as I have money at a variety of custodians, including TIAA-CREF, which has funds that are hard to track otherwise. Yes, it does involve the release of username/passwords to get that aggregation. You might not value it.

    You might also have seen an extended argument I had last week with AnotherReader when someone else blogged about Personal Capital. And in that context, where the original writer asked about whether signing on with Personal Capital for their advisory services with a .9% fee was worth it, both AnotherReader and I agreed that the additional value provided by Personal Capital beyond the free aggregation was not worth it. (But AnotherReader believes that financial advisors are all "parasites" and that paying for financial advice is almost never worth it except in the possible case of a one-off hourly consultation, whereas I see weekly that fiduciary advisors can provide value that is worth the cost to many of our clients--which is not the same thing as saying they are for everyone! AR couldn't seem to understand that the value *depends on* the client situation. But when you do things on a weekly basis like save a client from making an $80,000 mistake because she felt free to send you an email and ask before acting, since she has an ongoing relationship with you--and you see the mistakes that your friends make with their finances when they DON'T bother to ask (like converting all of their IRAs to Roths at once instead of doing several to-the-top of the bracket conversions, and thus incurring a much larger tax bill than necessary), you do feel like you provide value (certainly more so than I felt as a professor).

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