Each month when I receive my salary, I got a quick wonder about the difference between the “base salary” amount I think I am getting and the actual dollar amount that came into my bank account. This post is a quick breakdown for my own reference.
Things might change, for instance, if I choose to opt-out of vision insurance but opt-in to dental this year, then this breakdown will be inaccurate, but I think this will give me a much better sense of where the money went.
Things in this post maybe commonsense to many, and shouldn’t be hard to figure out; I just have not paid much attention to these things before. BTW, it should be obvious that the diagram is not drawn to scale.
Here are the items explained from left to right, bottom to top:
- Total Income: This is equal to the amount of my (annual) “base salary” divided by 12. A note here is that, this amount does not change month by month, regardless of how many days, workdays, holidays, vacation days, etc. in this month. It only changes when there is a salary change, which may be employer specific.
- Pre-Tax: These items are deducted from the Total Income directly. They are not taxable income, which is a nice thing.
- HSA Contribution: This is an amount that I chose to contribute to my HSA account. The maximal amount of this contribution is subject to IRS tax rules and differ by year and my age. My employer also contributes to a percentage of my choosing, which is not represented on this breakdown diagram. This amount first goes into a ConnectYourCare account with which I can pay my medical bills; then I can also transfer the money into the actual HSA account, and can invest the money there.
- Medical Insurance: This is a straightforward pre-tax item.
- Vision Insurance: This is a straightforward pre-tax item.
- 401(k): This amount is a fixed percentage of my choosing that goes into the 401(k) account. With money in there, I can spread investment into a list of given investment options and hope for miracle happens. The contribution amount is adjustable anytime, and, don’t quote me on this, has no upper limit.
- Taxable Income: These are the rest of income that are subject to income taxes.
- Tax (Withholding): This is not the tax, but an estimate of the tax I might need to pay. How much tax I actually pay will be decided in the following year in a tax return (or repayment). However, this amount is withheld and not released to me early. This is generally a good thing because it prevent people from being unable to pay taxes when tax season comes.
- After Tax Amount: The rest of the money are after tax amount. Some of them are deducted from my payroll directly, without me getting the money and then go to pay the bill somewhere else.
- Roth IRA: Another retirement account that I definitely need to read more on. Currently this amount is the same as my 401(k). I am not entirely sure what makes that happen.
- Parking: This is a straightforward item.
- Supp AD/D: This is one of the many additional insurance that I could buy, but honestly I forgot when and where I checked a box to buy this; it seems to have been there forever. Might be on medical insurance enrollment form that happens each year.
- WA L&I: Another insurance I didn’t remember where I selected the buy option. Or, is this one mandatory in Washington?
This posts made me think I might actually be a visual thinker? All of these items seem pretty straightforward now, after I finished diagramming them, but on paper those numbers just didn’t play along with me. Perhaps I should have drawn more pictures than posting text?