I feel like I've won every year the show has been picked up by Logo
because, really, nothing beats a paycheck.
-- RuPaul 

Few things are as critical to our well-being as our paychecks. Few of us are independently wealthy, so we need regular income in order to pay for housing, food, clothing, insurance, utilities, entertainment, taxes, transportation, and many other things. The arrival of a paycheck is a happy event, but it can raise some questions, too.

A hand-drawn clock with the words "time to get paid" instead of numbers. "Get paid" is in red and a hand with a red magic marker is poised next to the clock face.

Image source: Getty Images.

Here are answers to some questions you may have about your paycheck:

What do all those numbers mean?

Each company's paycheck can look a little different from another company's paycheck, but most will have a lot in common. Here are the kinds of numbers you'll see on typical paychecks:

  • Your gross pay: This is your total pay for the pay period. If your salary is $52,000 annually and you get a paycheck every week, it will be for $1,000.
  • Your net pay: This is essentially your "take-home" pay -- it's what's left of your gross pay after various subtractions have been made for taxes and other things. It's your bottom line.

Here are the kinds of subtractions that are made to typical paychecks:

  • Taxes: You'll typically have federal taxes withheld from your paycheck, based on how you've filled out your W-4 form. (There are ways that you can boost your tax refund via that W-4 form, too.) You may also have state and city taxes withheld. This may be annoying, but it means you don't have to come up with and pay 15% or 20% or more of your total annual income each April with your tax return. There are taxes withheld for Social Security and Medicare, too, via a line item usually labeled "FICA" -- for Federal Insurance Contributions Act. We're all taxed at 12.4% for Social Security (which might be labeled "OASDI"), and employers typically pay half of that, 6.2%, on our behalf, while we pay the other half. Medicare taxes us 2.9%, and that's also generally split between employers and workers, with each paying 1.45%.
  • Benefits: There are also a bunch of possible deductions to your paycheck for various benefits and purposes. If you're contributing to a 401(k) plan, for example, and/or a Health Savings Account (HSA) or Flexible Spending Account (FSA), those contributions will be subtracted from your gross pay. You'll also likely have deductions made for your portion of the cost of your health insurance, life insurance, disability insurance, and other things.

If you don't understand everything on your paycheck, it's worth asking your human resources department about it. They can explain all the line items to you, and if you think there's any error, they can look into that and fix it, if necessary.

Close up of the bottom of a pay stub, saying "Net pay: "$1,681.57"

Image source: Getty Images.

How does my paycheck compare to others'?

It's natural to wonder how you stack up to others. Fortunately, it's easy to gather information on the size of American paychecks. Here, per data from the Bureau of Labor Statistics, are average paychecks for Americans by age:

Age

Average Weekly Pay

Annual Equivalent

16 to 19

$420

$21,840

20 to 24

$528

$27,456

25 to 34

$758

$39,416

35 to 44

$950

$49,400

45 to 54

$962

$50,024

55 to 64

$954

$49,608

65 and older

$888

$46,176

Source: SmartAsset.com. 

Of course, your education will likely play a part in how much you earn. Here are median paychecks by educational level:

Education

Median Weekly Pay

Annual Equivalent

Less than high school diploma

$504

$26,208

High school diploma

$692

$35,984

Some college, no degree

$756

$39,312

Associate's degree

$819

$42,588

Average, all levels

$885

$46,020

Bachelor's graduate

$1,156

$60,112

Master's degree

$1,380

$71,760

Professional degree

$1,745

$90,740

Doctoral degree

$1,664

$86,528

Source: 2016 data from Bureau of Labor Statistics. 

You can also look up how your salary compares with others in your particular job, and possibly at your particular company, at various websites, such as salary.com, glassdoor.com, salaryexpert.com, payscale.com, indeed.com, and the Department of Labor's Occupational Outlook Handbook. As an example, I recently looked up "senior technical writer" in Boston, and learned that the median salary was $90,651.

How well do paychecks keep us out of poverty?

Most of us are not living in poverty, thanks to our paychecks. But we're not really out of danger, as a recent Bankrate.com survey showed 57% of Americans unable to handle an unexpected $500 expense, such as a car-repair bill. Making matters worse, a study by the Federal Reserve last year found that more than 1 in 5 Americans faced a major unexpected medical expense in the previous year, and the average expense was a whopping $2,782, far more than $500. This drives home the importance of having an emergency fund stocked with about six to nine months' worth of living expenses (including housing, food, transportation, utilities, insurance, taxes, and more).

Top of a 401k summary sheet, saying "personal 401k plan" at the top, and showing contribution and matching contributions now and year to date.

Image source: Getty Images.

Can my modest paycheck help me save for retirement?

You bet it can! Even if your paycheck isn't very hefty, small sums socked away regularly can make a difference. For example, if you can save and invest $100 per week for 50 weeks, that's $5,000 per year. The table below shows how much you could amass if it grows by an annual average of 8% annually -- and how much some bigger annual investments could amount too, as well:

Growing at 8% for

$5,000 invested annually

$10,000 invested annually

$15,000 invested annually

10 years

$78,227

$156,455

$234,682

15 years

$146,621

$293,243

$439,864

20 years

$247,115

$494,229

$741,344

25 years

$394,772

$789,544

$1.2 million

30 years

$611,729

$1.2 million

$1.8 million

Calculations by author.

Note that you might make your dollars go even further if you sock them away in tax-advantaged retirement accounts, such as traditional or Roth IRAs or 401(k)s. With Roth accounts, you can end up withdrawing the money in retirement tax free. Social Security isn't likely to be sufficient to support most of us in retirement, so it's important to be saving on our own, as well.

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