Confused about gross and net

[Anonymous]

We are in London. DH is in negotiations with a company to move to DC with a new job. I was talking to a friend in Connecticut about salaries and cost of living and she has thoroughly confused me.

She said that hee DH takes home about 10k each month after taxes, insurance, 401k and college savings.

In another conversation she said her DH makes 350k.

When I look at the payroll calculators online it looks like that should come out to more. What am I missing in terms of deductions. Or is she making a mistake somewhere?

We are aiming to be roundabout there in terms of salary negotiations (we hope) but am a bit taken aback at how little is take home after everything.

[Anonymous]

How much are they putting away for college? That is huge unknown.

[Anonymous]

He is a US citizen and will he have to pay US taxes?

[Anonymous]

A good rule of thumb for high earners is that you take home about 1/2 of your gross.

Maybe he gets a big bonus that bumps him up to total comp of $350k?

[Anonymous]

1/3 will got to taxes, leaving around $231K or about $19K per month (he must put a lot to retirement and savings).

[Anonymous]

OP here. They have two kids and i dont know how much they are putting away for college or 401k. I guess its a lot.

They are US citizens and pay taxes here.

The salary is primarily pay - very little or no bonus.

[Anonymous]

$350k - 25% for federal and DC taxes = 262.5k
Subtract $17.5k for 401k and $5k for a spousal IRA = $240k
Subtract $500/mo for each of 2 kids for a 529 = $228
Insurance might be another $400/mo = 223.2
Maybe he also contributes 10% to an ESPP - although my company caps out at $15k/yr = $208.2 - 188.2

Agreed - something' doesn't add up even if their 529 and insurance costs are higher.

[Anonymous]

THanks PP. Arent taxes much higher than 25%? I thought it was closer to 40% for this income level?

[Anonymous]

Anonymous wrote:THanks PP. Arent taxes much higher than 25%? I thought it was closer to 40% for this income level?

39.6 marginal rate for fed (I would assume a 25% effective rate)
Plus state (if applicable) - estimate 6-8%
Plus payroll - 6.2%

Plus deduct other things like retirement and insurance

[Anonymous]

Anonymous wrote:THanks PP. Arent taxes much higher than 25%? I thought it was closer to 40% for this income level?

No, the top rate doesn't kick in until TAXABLE income tops like $450,000. He'd have to earn like $500,000 at least.

Most probable explanation is she misspoke. Maybe she means $10,000 per pay period and he's paid biweekly.

[Anonymous]

Most probable explanation is she misspoke. Maybe she means $10,000 per pay period and he's paid biweekly.

This was my first thought as well.

[Anonymous]

OP here. Thanks everyone. Think I will rely on the info here as a guideline instead of my friend.

[Anonymous]

Anonymous wrote:A good rule of thumb for high earners is that you take home about 1/2 of your gross.

+1. $10k/biweekly is much too high while $10k/month is too low. He might save a ton outside of tax-advantaged accounts, defer compensation, or maybe he doesn't really make $350k.

[Anonymous]

Anonymous wrote:

Anonymous wrote:A good rule of thumb for high earners is that you take home about 1/2 of your gross.

+1. $10k/biweekly is much too high while $10k/month is too low. He might save a ton outside of tax-advantaged accounts, defer compensation, or maybe he doesn't really make $350k.

Alternatively, he might make some higher amount but have $10k per month go to their checking account to cover household costs, bills, and spending. We live on a lot less per month than we make and, honestly, I could totally see myself thinking "we make x" when, in reality, that's just the portion of the net we give ourselves.

[Anonymous]

Actually, 10k per pay period (assuming 26 pay periods) sounds about right to me based on the number of deductions he is taking.