This now leaves our household with $88,800, but we still need a place to live. While taxes are different for everyone, we will estimate the annual tax liability to be about 20%, or $22,200. Most states will also charge an income tax (3.07% in Pennsylvania) and you may also have to pay a local tax (usually about 1%). Our new tax rules would put your Federal Income Tax at about 15%. (Income – Pre-tax Investing – Standard Deduction = Taxable Income). If we take our savings and the standard deduction, our taxable base is now $111,000. In our scenario for a couple who files jointly, the standard deduction is now $24,000. Usually taxes are withheld directly from your paycheck. If your employer offers a match, this will be higher, but you should still save 10%. So if you are earning $150,000 a year, you will be saving $15,000. The good news, if you do this with an employer sponsored plan, you can also lower your income taxes.
I feel 10% is the minimum people should be saving for retirement. No matter what, make sure you put money aside for yourself. This is one of the first rules in building wealth. Let’s apply some of these basic rules to a couple with an income of $150,000 who file taxes jointly. This doesn’t mean you can’t follow some basic rules, rules that can be applied to any income level. Building a budget is a unique process for everyone. Everyone has a different salary, lives in a different part of the country and in short, is different.