After much internal debate, I decided to up my TSP contributions a few weeks ago (for those new to the blog, since I'm a federal employee, I have a TSP rather than a 401(k) - but they're similar). I had been contributing 5%, enough to get the full match, but hadn't done more than that. After my most recent promotion, I decided it was prudent to increase my numbers a bit. I did the math and decided to up my contribution by around $65. I knew that this would reduce my taxable income, but I really hadn't put much thought into it. With the question of whether or not my roommate is staying, I didn't want to contribute too much and then realize that I need that money later. I can always up my contribution in a few months.
Recently, I got my first paycheck with the new retirement numbers. It was much higher than I expected. My combined federal and state taxes dropped by almost $25! Suddenly, the $65ish I expected to be pulled from my paycheck is closer to $40. Now, I have to admit, I'm a little suspicious of these numbers and wonder what it will mean when I do my taxes next spring, but for now, it's a great surprise. I'm thinking about bumping my contribution up even more.
So for those of you holding back on bumping up your 401(k) contributions, it might be a good idea to look into it. You might not be reducing your net pay as much as you think.