Paycheck Deductions
Paycheck deductions for savings are one of the greatest ways to take care of your future self. When you commit to allowing your employer to automate savings, you are paying your future self before you spend on anything else.
You can model contributions in PlannerPlus with the following enhancements:
Model percentage or dollar amount contributions
Auto escalate your contributions
Add tiered employer matches
Split contributions into different account types
What are Income Linked Contributions?
Income linked contributions are contributions that are made directly from your income streams
Contribution amounts are deducted from gross pay prior to paying other expenses
Employer contributions are in addition to gross pay and are not counted as income
Contribution limits are enforced for Traditional IRAs and 401ks
Contribution limits are assumed to increase each year using the general inflation assumption for the Scenario and Assumption (Pessimistic, average or optimistic)
What are Income Linked Contributions Best Used for?
Employee contributions that are deducted from your paycheck
An employer match
Contributions that you want to occur no matter what
How can I add Income Linked Contributions to my Plan?
The first thing you need to do is head over to Income and make sure you have a work income stream.
Use the pencil icon to edit the income stream and scroll down and press "Add a contribution."
When asked “How are contributions made?” Select “It’s deducted from my paycheck.”
When asked “Do you make contributions to any accounts directly from your paycheck?” Select “Contributions to retirement savings.”
Select a percentage or dollar amount for your contribution and any auto escalation you plan.
Once you've entered the employee contribution, you have the option to add the Employer Match. When asked “Does your employer match your contributions?” select YES and add your employer contribution rule.
When asked “Where does your portion of the contribution go” you have the option of pre-tax, Roth and Split.
If you enter a contribution to a pre- tax account you'll only have one account to select. If you enter a contribution to a Roth account or a split contribution, select a pre tax account for the Employer Match (yes, employer matching to Roth is a feature under development) and a Roth account for your employee contribution. If you don’t have an account set up, the Planner will prompt you to add an account.
Press save
What contribution limits are applied in Planner?
We apply the annual limit for all traditional and Roth IRAs per person
We apply the annual limit for one 401k/403b per person
We allow annual contribution limits for one 401k or 403b and 457b per person
How are Income Linked Contributions Funded?
Income linked contributions preclude funding of expenses. The contribution will be made and may create a gap between income and expenses. When this occurs, the Planner will drawdown from savings to fund your expenses.
How do I increase contributions to model the "catch up" amount after age 50?
In order to model a change in contributions, you'll end your current income stream with contributions at age 49 and 11 months and add a new income stream at age 50.