How does your tax bracket factor in to how much you save in a tax sheltered requirement plan? Does it factor in.HELP PLEASE!!
Yep, it does. If you're in the 15% tax bracket, then you save 15% on every dollar you put into a tax-deferred retirement plan. If you're in the 25% tax bracket, then you save 25% of every dollar you put in. And so forth.
Sort of. Most people are in the 15% tax brackets when they make the money and when they retire. However, when you defer the income until retirement, you have more invested. The income also grows tax deferred. So, with more invested, you have more income at retirement (as opposed to a regular savings plan). If your income is low, you can also get a saver's credit. If your tax rate at retirement is lower (or you roll the money to a Roth in a year you are unemployed), then you never pay the difference in taxes.
