I worked for an hour yesterday on how to adjust withholding and increase our retirement contributions. It took awhile because I didn't agree with the numbers the IRS Tax Withholding Calculator was giving me. The calculator said to withhold 5 to get a $300 refund next year, it's actually 6 I need to withhold for that type of refund. If I did six the refund would have been much larger and that is withholding far too much. They did have our expected tax correct though!
I was also using Paycheck City to calculate the various net pay scenarios with different amounts going to retirement. In the end we are going to increase retirement by 2% of my husband's basic pay, to a full 10% going to the Thrift Savings Plan (TSP). This will be an increase of about $150 a month. We are going to keep contributing to Roth IRAs since we are still in the 15% tax bracket for our taxable income.
We are now contributing 17.5% of gross wages. I think this is the highest percentage we have been at, up from about 16% at one time. I should consider increasing it again to start getting closer to 20%. Especially while we are in my husband's highest earning years. There are only about 8 years left before he retires from the military. We want to make it count, right?
I feel so much better having taken care of these changes now, early in the year. It would be so easy to just say I was busy and then find ourselves owing a lot to the government, or not taking advantage of investing more.
Did you have to change your withholding this year to avoid paying taxes next year, or even over withholding? Did you increase your retirement contributions?
Paycheck Changes
February 19th, 2015 at 04:31 pm
February 19th, 2015 at 09:12 pm 1424380334
February 20th, 2015 at 02:03 am 1424397821
I'll have another raise in August (union contract) otherwise I might have upped it to 4.