The Budget Checkup is intended to provide users with an educational assessment of how their savings and spending habits compare to Fidelity's suggested guidelines. The checkup is based on Fidelity's point of view that users should allocate 50% of their take home pay to essential expenses, 15% of their pre-tax income towards retirement savings and 5% of take home pay to short term savings, which can be used to cover variable miscellaneous expenses which are difficult to budget. Additionally, Fidelity suggests users have an emergency fund available to cover 3-6 months of essential expenses. The Budget Checkup is intended to serve as an educational tool and should not be construed as tax or investment advice. Your circumstances are unique therefore if you believe that you need personalized tax advice, then you should consult a tax advisor.
Your estimated after-tax income is calculated by applying an estimated federal effective tax rate to the value entered for your yearly household income (an effective tax rate is the average rate at which earned income is taxed). Your actual after-tax income may be higher or lower than this estimate. The total income you enter should be the same as the income which is reported on page 1 of the IRS Federal Form 1040 and refers to all of your federal total (pretax) income that you may subsequently 1) apply adjustments to, 2) apply deductions to (standard or itemized), and 3) apply personal exemptions to in order to derive a value representing taxable income that a tax obligation will be based on. To calculate your hypothetical effective tax rate, we estimate your total deductions by using Statistics of Income data provided by the Internal Revenue Service. The Statistics of Income data is based on averages and may not represent your personal situation. A rate of 5% is added to the calculated federal effective rate to estimate potential state and local taxes. Your actual state and/or locality may use a different rate.
Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
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