Net Effect of Contributing to your Pension

Assumptions

  • 50K salary
  • 40% tax bracket
  • Paycheck received twice a month

Net wealth with no contribution

  • Gross pay: $2,083.33 (received bi-weekly)
  • Net salary: $1,250
  • Therefore net wealth with no contribution is $1,250 (received bi-weekly)

Net wealth with contributions

(please note that this does not take into account growth etc. simply the value when the contribution was made)

Contribution (%)Contribution ($)Taxable SalaryNet SalaryReduction in Net SalaryNotes
2% $41.67 $2,041.66 $1,225.00 $25.00 Costs $25 to make $41.67 contribution
4% $83.33 $2,000.00 $1,200.00 $50.00 Costs $50 to make $83.33 contribution
6% $125.00 $1,958.33 $1,175.00 $75.00 Costs $75 to make $125.00 contribution
8% $166.67 $1,916.66 $1,150.00 $100.00 Costs $100 to make $166.67 contribution
10% $208.33 $1,875.00 $1,125.00 $125.00 Costs $125 to make $208.33 contribution

Important takeaways

  • Additional growth potential as deferred taxes are still generating returns within your policy
  • Lower tax bracket at retirement when it comes time to take income
  • Therefore you get access to additional growth at a reduced fee
Resources Learn more Request more info Learn more
Individual Coverage