Pre-tax Contributions

More reasons to save.

When you make contributions in the 401(k) Plan, your contributions are deducted from your pay on a pre-tax basis. Which means your contributions are not subject to federal income tax or most state and local taxes. As a result, it doesn't actually cost a dollar to save a dollar because your take home pay is reduced by less than the amount of your contribution.

To see how it works, take a look at the chart. Let's assume you earn $2,000 per month; and you're not saving in the FedEx 401(k) Plan. Federal withholding on your $2,000 monthly earnings is $560. This brings your net take home pay to $1,287.

Now, using the same chart, let's assume you're contributing $100 per month to the FedEx 401(k) Plan. This reduces your federal withholding to $532. Your net take home pay is $1,215. A difference of $72.

The message here is you can make a $100 contribution to the 401(k) plan for $72. Your current taxes are less because your contribution is deducted from your earnings before taxes are calculated.

Your 401(k) plan assets grow tax-deferred; so, you pay taxes when you receive withdrawals or distributions from the plan.

Take advantage of pre-tax contributions by saving more in the 401(k) plan. Enroll in the 401(k) plan or increase your contributions today at vanguard.com/retirementplans.

NOTE: Assume a federal income tax rate of 28%. In some states, 401(k) Plan participants may benefit from state tax savings, also. Numbers shown in the example are not intended to represent a specific employee but are shown only for illustrative purposes.

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