How to assess the impact of taxes on your paycheck

In order to make the best decisions about finances, it is imperative that any investor understand the impact of taxes on his or her income because the amount you make in the workplace is certainly different than the amount you take home. Let’s say your annual wages or salary is $80,000.  You don’t get to bring home that much and spend as you please. First the government wants their share.  Social security (often shown as FICA or OASDI) takes 6.2%, and then Medicare takes 1.45%. (And, by the way, your employer has matched that percent as well for Social Security and Medicare and it is not income to you). Now pay in your amounts to Federal Income tax (effective rate of 12%), and Wisconsin income tax (effective rate of 3%).  Calculating all that out, you have $80,000 minus $4,960 minus $1,160 minus $9,600 minus $2,400 to have $61,880 remaining.  Now subtract your 10% retirement plan contribution of $8,000. Don’t forget your share of your employer’s healthcare cost at $300 per month for $3,600 per year.  Essentially you are taking home about $50,280 per year to spend on your housing, utilities, clothing, transportation, gifts and entertainment. Even at the $61,880 each year it can be difficult for a family to make ends meet. There is always an interesting study that comes out that shows “Tax Freedom Day”. This is the day when the nation as a whole has earned enough money to pay its total tax bill for the year.  Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income.   This is considered about how long into a year you have worked to pay for federal, state, and local income taxes, sales taxes, real estate taxes, and all other taxes hidden in costs of items purchased. For 2015 that date was April 24th.  That means that if all your pay was going toward taxes,… | Read More »

Maximize your company’s 401(k) plan and minimize your liability risk

Owning a business can be one of the most rewarding professional experiences. If you are like most business owners, you have invested greatly and sacrificed much to follow your vision and reap the personal and financial rewards that go along with it. The day-to-day challenges are daunting even for the most tenured and savvy businessperson. No matter how successful you are, you risk losing everything if you don’t keep up with constantly evolving laws. Most employers are unaware of a recent Supreme Court Ruling that expands the rights of employees to sue over their 401(k) plans, and increases pressure on employers to be vigilant in monitoring their retirement plan offerings. Tibble v. Edison International emphasizes that overseeing a retirement plan includes a continuing duty to monitor investments and remove options that aren’t prudent. The Supreme Court extended the six-year period in which employees may sue an employer so it begins when the employer is alleged to have breached his or her duty in monitoring the plan, rather than when the investments in question were added to the plan. Another very important fact business owners need to understand is that anyone with discretion over the plan is considered a fiduciary, meaning they are legally responsible to act in the plan participants’ (employees) best interest both in the selection and continued monitoring of the investment. How can you make sure you are protecting your company and still focus on driving your business objectives? 1) Due Diligence – Can you answer these questions? • Do you know how much your 401(k) plan is costing you and your fellow employees? • Do you know what investment options are in your plan? • Do you have true diversification options? • Is your plan serving your interests? • Have you researched other plans? 2) Be aware of what the Dept. of Labor is looking at: • High plan fees • Fee disclosure • Investment plan options… | Read More »