A 401k is a popular retirement savings option. This deferred compensation program allows employees to contribute a portion of their wages before taxes are deducted. The federal government limits the amount of possible yearly contributions by an employee, with $16,500 being the maximum amount for traditional 401k accounts as of 2011. Many employees determine how much to contribute based on a certain percentage of their income.
1. Write down your gross or net income, depending on which one you want to use in order to determine a percentage deduction. Your gross is the total amount of money you make, whereas your net is how much money you "bring home" after taxes and deductions.
2. Determine the percentage that you want to deduct for 401k contributions. You might choose a figure of 10 percent, for example.
3. Convert the percentage to a decimal by dividing it by 100. In this example, you would divide 10 percent by 100 to get 0.1.
4. Multiply your answer from Step 3 times your income in order to determine your 401k deduction. For example, if you make a net income of $4,000 per month and you want to deduct 10 percent, you would multiply 4,000 times 0.1 to get a monthly deduction of $400.
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