3 Ways to Use Your Payroll Tax Cut
You may or may not have noticed, but you’re receiving more money in your paycheck! This extra cash is a result of the 2011 Payroll Tax cut, which can put up to $2,136 in your pocket. This cut reduces the Social Security payroll tax for employees by 2%, bringing it from 6.2% to 4.2% for anyone with annual income up to $106,800. For couples, that’s up to $4,000-plus of disposable income at your fingertips.
So, how much can this payroll tax cut save you? It depends on how much you currently earn, but as an example, if you earn $50,000 a year, your paycheck should go up by $83 a month. If you make $100,000 a year, then you’ll see an extra $167 each month in your check.
But here’s the $2136 question …What are you going to do with that extra money? Here are a few options:
1. Invest in your future.
You can use the money to boost your 401(k) contribution rate in 2011, or fund an IRA. It may not seem like much; however, the more you invest now, the more you’ll likely have for retirement. You can add 2% to your retirement account without reducing your take-home pay.
2. Increase your savings.
Many of us have an automatic deposit into savings each time we get paid. If you don’t have this, now is a great time to set that up. Check with your employer to see if this is available. If it’s not, one of our personal bankers can help. If you haven’t been saving and you want to get started, you could take the extra money that you’re receiving each month and dump it in a savings account.
Opening a CD is another great way to save. We offer CDs that range from 3 months to 5 years, with a minimum deposit of $500. We even have special CD rates. Rates do change frequently. Go here to check the latest rates.
3. Pay down debt.
Your 2011 payroll tax cut might be enough to add a 13th mortgage or car payment. If you continue to pay a little more each year, you can shave a few years off of your loan and save in interest.