*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
COMMENTARY | All the recent fighting and bickering in Washington regarding the payroll tax credit extension finally resulted in an extension that will see individuals paying a reduced Social Security rate of 4.2% versus 6.2% until February 29, 2012. While I'm not fully sure what it all means, I do know it will represent around another $40 per month for my family. While this money isn't all that much, every little bit helps so we will happily take the assistance. However, we won't be stimulating the economy with this money and instead will save it as it was meant to be saved in the first place.
The Extra Won't Mean Extra
Fortunately for my family, my wife and I make a comfortable living. While we are far from rich, we aren't struggling either so while this money is a nice little "bonus" for us to look forward to, we don't plan on spending it on everyday expenses or spending it on ourselves because we just don't need to do that.
Take From Savings Put Into Savings
Since the extra money that we will realize is going to be coming directly from what would have gone into the Social Security pot it seems only right to save that money towards our retirement in another way. Therefore, instead of viewing this extra income as money that we can go out and spend on whatever we desire, my wife and I have decided to earmark the extra cash towards our retirement. Our plan is to simply divide the extra money in half and then deposit it into our IRA accounts.
In this way we will be sure to put money away that was indirectly meant to be contributed for our retirement anyway. Should we spend it on whatever, then that is sort of like taking away from our future to spend more today. Again, we aren't the richest people in the world, but we don't have to pick apart our retirement savings to make it by either so the money will be saved.
Looking Forward
There is no telling what will happen with this tax break moving forward. While some reports say it is likely to continue, others say it will cease as planned. In other words, it's anyone's guess as to what happens in the not so distant future.
As far as we are concerned, whatever happens, happens so we will simply stay the course. Should the tax break come to an end then our paychecks will reflect such and there will no longer be that little bit of extra to stash into our IRA accounts. However, should the extension get extended once more than we will continue to use the extra income to help fund our future.
4 comments