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Level 2

Question

How much to invest in a 403b retirement plan to save in taxes?

Forum|Forum|7 years ago
June 3, 2019
3 replies
1 view

Hi! My employer is matching my contribution to a new 403b up to a 7 percent and giving me 2 percent (16 percent max) I need to decide if this is going to help me reduce taxes and what will be the best amount to get the maximum benefit in tax reduction. I earn 75K a year. And I don't have dependants or any other way to reduce taxes.

TurboTax Deluxe Online

Alumni - Champ

What is the max percent the company will allow you to contribute?

PLPAuthor

Level 2

I could put as much as the limit but my company will only match up to 7 percent. So if I put the max it will be 7 percent (me) plus 7 (company) plus 2 (company) total of 16 percent

Alumni - Champ

If you contribute 7%, then your wages are reduced by that 7%, and the remaining 93% is Federally taxable for the year. State may be different.

Even if there is no company match, your contribution is not taxed when you make it, and your earnings grow tax-deferred.

https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-403b-tax-sheltered-annuity-plan

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-403b-contribution-l...

https://turbotax.intuit.com/tax-tools/tax-tips/Retirement/-Are-403-b--Contributions-Tax-Deductible-/...

Alumni - Champ

75,000 x .07 x .25 (Federal tax rate) = $1312 tax savings
<a rel="nofollow" target="_blank" href="http://fairmark.com/general-taxation/reference-room/2017-tax-rate-schedules/">http://fairmark.com/general-taxation/reference-room/2017-tax-rate-schedules/</a>