If you max out your 401(k) like I do by asking your employer to send a percentage of your income to your 401(k) each paycheck, you will probably have some extra cash flow on your December paycheck.
If you earn more than the Social Security maximum earnings for the year ($106,800 for 2011), then you’ll probably have that extra cash flow on your December paycheck as well.
I’ve gotten so used to the huge chunk of money that comes out of my paycheck to go to my 401(k) each month that I don’t even notice it’s gone anymore. But now I’ve realized that the full contribution won’t be taken out with my December paycheck since that’s unnecessary to max out the 401(k). I then realized that I’m hitting the Social Security maximum earnings for the year with part of my December paycheck, so I won’t pay the full Social Security tax amount that I’ve been paying all year. I used a paycheck calculator to estimate my December paycheck.
I estimate that I will see about $500 more in my checking account with my paycheck tomorrow! That’s all extra money going to my emergency reserves, closing and moving costs and will reduce how much I have to pay myself back over the course of next year.
Readers, are you getting any extra cash flow with your December paycheck? What are you going to do with it?