I recently adjusted the amount of money that I ‘take-home’ so that I can maximize my 403b contributions for 2007. The maximum contribution amount for 2007 is $15,500. In January, I elected to have $1000 per month contributed to my 403b, but in mid-June I decided that I needed to adjust my contributions. So, my monthly paychecks for July – December will be $583.33 less. ($3500 / 6 months = $583.33)
This additional contribution of $3500 should save me $875+ in income taxes for 2007. (I’m in the 25% tax bracket.) So, by maxing out my contribution for 2007, my total tax savings should be approximately $3825. ($15,500 * 25% = $3825)
I’ve already managed to fully-fund my Roth IRA for 2007 and I’m working on my fully-funding my wife’s Roth IRA. By fully-funding multiple types of retirement account, I can diversify my investments AND my tax risks. The 403b will grow “tax-deferred”and the Roth IRAs will grow “tax-free”.
I’m working very, very hard to save $48,000 in various retirement and savings accounts. This adjustment was partially “planned-for”. In other words, when I created my $48000 goal, I had hopes that I could adjust my paycheck and fully-fund my 403b. So, this adjustment keeps me on track to meet my goal.