Monday, July 31, 2006

Financial sleuthing

So today I'm doing some legwork to answer two questions. 1, is there any way that I can remain under the $25,000 limit for the retirement savings credit, and 2, if I got a new job, what would I have to make to equal the actual money given to me by this job?

My pre-tax earnings are $2500, here's what I get taken out pre-tax:

$54.81 for health insurance
$50.00 for pre-tax 403(b) contribution
$31.41 for flexible spending account
$225.00 involuntary retirement contribution to 403(b)
$45.80 for parking pass for Boyfriend

$34.36 for Medicare
$126.63 for federal taxes (although it is $1195 for the year, I recently adjusted my W-4)
$56.01 for state taxes
$47.39 for local taxes

I have an after-tax payroll deduction of $31.66 for my gym membership, and I get a taxable benefit of $1.25 per month on the group life insurance (any premium amount that pays for coverage above $50,000 is taxable - we're insured for 2.5x our salary for a non-accidental death, and 5x for an accidental death.)

Question 1.

I think this year I won't be able to take the retirement credit. I'm trying to figure out if I can afford to stick enough in my 403(b) that it will lower my AGI to the point that I can take it. Last year, even though I only had my full-time job for half the year, I also had $7,000 of self-employment income. But I barely made it under the bracket at an AGI of $24,308 (says my tax return online at H&R Block.) This year, I filed a W-9 with DealBarbie because I'm well over $1000 there now, so I'll definitely have to pay taxes on that. (I think it will be as self-employment income.. so that will be a nasty hit. I should probably save some of the money for taxes.) Earlier this year I also made about $900 from a part time temporary job I had. But I'll have been paid for the whole year.. damn. So $30,000 from my regular job, $900 from the part-time, $1400 from DealBarbie, $100 miscellaneous, total of $32,400.. and I think the only non-standard deduction I get is the student loan interest one, and I think that'll be about $700. So how much would it cost me to get below $25k? More than $1,000 per month. I don't think I'm going to swing it. So I might stop my pre-tax 403(b) contributions and put the money in my Roth instead.

Question 2.

So as stated above, I make $30,000 per year. This is pretty good for my position, but I think if I were working for a private company (ie a contract research organization or something similar) I'd probably make more money. Boyfriend and I have been discussing whether I should look into taking a monitor position which would likely involve at least 60% travel, because he's going to be so busy next year with his master's examination studying and classes that I'm not going to see him much anyway. And the high pay these positions command is very enticing. (Like, say, for a down payment?) But I don't know - I'm a homebody and there's a good chance I might not like it much, but on the other hand it would look GREAT on my resume. Anyway.

The issue for me is my retirement contributions. Right now I enjoy a very cushy package because I'm a state employee, and thus instead of paying the 7.5% or whatever towards Social Security, I pay 9% (or it might be 9.5%) directly into my 403(b), and my work contributes 13.31% as well. This works out that I'd have to make an extra 22.31% pre-tax in order to get the equivalent amount of money. So if I did make an extra 22.31% at a new job, I could effectively sock all of it away into a 401(k) and end up with exactly the same take-home pay. So what would that be? A measly $6,693. Somehow I thought it would be a lot more than that. But whatever. So basically, if I get a new job which pays at least $36,000, I can continue to put away at least $700 a month (figure includes my current Roth and voluntary 403(b) contributions) without actually feeling the pinch. Any more than that would just be extra gravy. I think I can probably swing that - assuming that I decide to leave. The positions I've been looking at in other departments at the same place I work now have paid at least $40k. (I've only applied for two, though, and one I didn't meet the minimum qualifications, and one is already considering a current employee. So I'm not worried that I haven't gotten any interviews.) The great thing about simply switching departments is that if I stay here, I still get all the free money - so everything above it is REALLY free money. If I got a $40k job here, that 22.31% would turn into $8,924 - so a $40,000 job with the free retirement money is equivalent to a $49,000 job without the free money. Things to think about...


Ms. MiniDucky said...

What's the difference between your $50 pretax 403(b) and the $225 involuntary 403(b)? I've never seen an involuntary retirement payroll reduction item before, that's not the state's matching amount right? Since these are items that are deducted from your check?
The additional matching you get is pretty awesome! My employer is a private university and they don't match a thing for non-exempt employees, only for exempt employees. For us non-salary schmucks they will deposit something like 2% of our pay in a separate account that we're vested in after FIVE years. Pf.

Kira said...

We're enrolled in a pension plan in lieu of Social Security - so the involuntary contribution is a percentage of my salary that goes in as my contribution to the pension plan. In my case, I'm in what the university calls the Alternative Retirement Plan, which is just a straight 403(b). On my taxes, this doesn't count as a voluntary contribution because it's as voluntary as Social Security (which is to say, not voluntary at all.)

Yeah, I am really happy about the match =) It also means that as my salary goes up, so does the match, and if I get a new job here, it goes up a LOT more. I'm glad that I'm not forced into participating in a pension plan, and I can just take my money with me when I leave (and roll it into a Roth!)

Then Things said...

40k still sounds like a lot of money to me! Hopefully I'll be there soon enough.
You are so lucky to get such an awesome retirement package, my company doesn't match at all.