# How to Calculate Your Paycheck After Retirement Deduction

by Lisa Bigelow

An employer-sponsored retirement account is a widely used benefit that allows a worker to save for retirement on a pretax basis. Calculating how these contributions will affect your take home pay is easy, but employees must take care to analyze how this reduction in take-home pay will affect their everyday budgets. While saving for retirement is smart, going into debt to pay for it isn't. As a result, taking the time to analyze where you'll need to cut back to fund these contributions is wise as well.

1. Calculate your annual contribution. Multiply your annual salary by your desired contribution. For example, if you earn \$75,000 per year before taxes and you wish to contribute 10 percent per year, your annual contribution totals \$7,500.

2. Subtract the result from Step 1 from your gross annual salary. For example, \$75,000 gross annual salary less \$7,500 in retirement contributions totals \$67,500. Keep in mind that the IRS limits pretax contributions to traditional employee-sponsored plans to \$16,500 in 2011. As a result, if your result from Step 1 is greater than this amount, only the first \$16,500 will be removed before taxes.

3. Divide the result from Step 2 by the number of pay periods you have. For example, if you are paid semimonthly, then divide the total by 24 (2 times per month times 12 months). This result is your gross pay, less your retirement contribution.

4. Subtract taxes and post-tax benefits from the result in Step 3. Remember, you haven't paid taxes yet. If you earn benefits, such as health care or life insurance, those benefits are paid for post-tax. Because taxes vary, contact your payroll representative to determine how adjusting your retirement withholding will affect these deductions. Alternatively, Bankrate offers an online calculator that will estimate your tax withholding.

#### Tip

• Adjust your percentage lower if the retirement deduction proves too costly. Alternatively, if you have extra disposable income, raise it.

### Items you will need

• Gross (pretax) annual pay
• Contribution percentage
• Calculator