The Daily Pondering

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Saturday, April 16, 2005

How does my paycheck dwindle so fast?

Every week, I receive my weekly paycheck stub. And every week, I gasp when I realize my income seems to disappear. So, it's time to sit down with my paycheck stub and determine how my money evaporates into thin air before I even have a chance to spend it. Here goes:

First, the number of hours I've worked each week is multiplied by the hourly wage. The result is called the total gross income. Simple enough so far.

Then, pre-tax deductions are subtracted...
- 8% of total income --> company's 401k plan (company matches 4% in pre-tax dollars)
- 2.5% of total income --> purchased company vacation time
- <1% of total income --> basic dental, vision, & medical benefits

The remaining amount is used to calculate my taxable gross income. Using my taxable gross income, all of my taxes are calculated ...
13.9% of total income (or 15.7% of taxable income) --> Federal taxes (a.k.a. Fed Withholding)
4.6% of total income (or 5.2% of taxable income) --> California taxes (a.k.a. CA Withholding)
1.4% of total income (or 1.6% of taxable income) --> Medicare (a.k.a. Fed MED/EE)
6.0% of total income (or 6.8% of taxable income) --> Social Security (a.k.a. Fed OASDI/EE)
1.0% of total income (or 1.2% of taxable income) --> California State Disability & Family Leave Temporary Disability Insurance (a.k.a. CA SDI FTDI)

Then, more post-tax deductions are subtracted...
<1% of total income (or <1% of taxable income) --> Accidental Death & Dismemberment , Long Term Disability, & Life Insurance

Believe it or not, all of the deductions and taxes add up to about 39% of my total income. So, that leaves me with a whoppin' 61% of my paycheck to actually see and play with! Wow! The leftover money is referred to as my net pay. And then, to think that we pay sales tax using our post-tax dollars to buy goods and services... what a rip-off!