The newly minted federal payroll
tax deduction means an instant pay increase for employees nationwide. Soon, workers can expect a bump in pay that may provide an added $2,136 in 2011 - with double the increased income for couples earning more than $106,800, according to the New York Times.
The rise in salary should be put to good use, says Ron Lieber of the Times. Rather than simply spending the money on non-essential items, Lieber states any added revenue should go toward long-term personal financing. Decreasing credit card debt, car payments and mortgages should be a focus.
Lieber also suggests putting the increase toward retirement. The federal government is providing individuals with new money to fund 401(k)s. Lieber says the long-term benefits of investing the new money can have valuable effects upon retirement.
"The real beauty here is in the potential for compounding. That luggage bought with the gift card will only depreciate. But $2,000 will turn into $11,487 if it earns 6 percent a year over 30 years," Lieber writes.
Starting January 1, payroll taxes will fall from 6.2 percent to 4.2 percent for individuals, while the self-employed will pay 10.4 percent rather than 12.4 percent. In all, the new code will provide approximately $120 billion in tax cuts.
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