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Saving a %
Old 09-25-2012, 09:52 AM   #1
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Saving a %

When you figure your savings for retirement do you count what your employer matches? For I stance, you want to save 15% of your income and you get a 5% match. Do you save 10% plus their 5? Or do you save 15% and the match is just gravy?
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Old 09-25-2012, 10:01 AM   #2
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When you figure your savings for retirement do you count what your employer matches? For I stance, you want to save 15% of your income and you get a 5% match. Do you save 10% plus their 5? Or do you save 15% and the match is just gravy?
The analysis targets that I have seen include the company match as part of your savings. So if you save 10% and the company match is another 5% then you are saving at a 15% target.

By the way, If you choose to save significantly more, then your options as you get somewhat older are large.

What I read is to...

save 10% for a bare bones retirement when you are old
save 15% for a comfortable retirement when you are old
save 20-50% to escape young and/or to have a very comfortable retirement

If you started saving late, then you'll have to increase the savings targets to make up for lost time.
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Old 09-25-2012, 10:08 AM   #3
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Me personally, I have included the employer contribution into my savings rate only after "vesting". Some employer contributions vest over 3 to 5 years, so I factored in only the % vested.

Edit - add, it's also good to increase gross earning potential too if you include employer contribution.
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Old 09-25-2012, 11:24 AM   #4
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I never included the match in my percentage. Kind of makes the actual savings rate a little vague though.
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Old 09-25-2012, 01:45 PM   #5
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I look at employer match as gravy. What impacts my spending budget during working years is my contribution... not the employers contribution.

The employer contribution may make you hit that magic number (whatever that is) sooner - or allow for a bigger number... but it's not under your control... only your contributions are under your control.

+1 to the idea that getting raises impacts both the employee and employer side of contributions.
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Old 09-25-2012, 03:59 PM   #6
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"gravy" is the word. Agree with rodi.

We've always made sure to save enough in the given plan to reach the full match amount, but beyond that, I don't think about it. It is gravy.
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Old 09-25-2012, 05:08 PM   #7
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I don't think about the numbers or percentages, I just invest as much as I can afford.
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Old 09-25-2012, 06:28 PM   #8
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I only addressed the % which I personally placed in the retirement plan.
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Old 09-25-2012, 07:10 PM   #9
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you want to save 15% of your income and you get a 5% match. Do you save 10% plus their 5? Or do you save 15% and the match is just gravy?
You're looking at it the wrong way.

Save as much as you can afford to save using dollar amounts (today's dollar). Look toward the finish line, not the part of the track that the horse in running on now. It's all about how much you have at the end of the race.

If you can afford to save 15% (or dollar amount equivalent), go for the gravy.
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Old 09-25-2012, 08:20 PM   #10
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I think the reason to pay attention to percentages is because it gives you a good sanity check if you are aiming for early retirement.

In trying to replicate a traditional pension (2-2.5% X years worked) that you can collect at 55, I found that the combined employee and employer contribution needs to be between 25-35%. One of the reason that pension plans get in trouble is they under contribute.

I personally would count employer match, although perhaps only counting the vesting portion would make the most sense.
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Old 09-25-2012, 09:57 PM   #11
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I'm no longer saving but when I was I would not have included the match.

You can only "save" what you have available to spend so in my view the match is not part of what you sacrificed. It is a tax-deferred bonus that you received for saving.
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Old 09-27-2012, 11:30 AM   #12
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I'm maxing out my 401K and the employer match is gravy. Partially because if I leave the company before 6 years it is not 100% vested, and partially because I just want to get as much in there as possible.
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Old 09-27-2012, 05:29 PM   #13
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I personally would count employer match, although perhaps only counting the vesting portion would make the most sense.
Lets not forget that an employer may not be required to match your contribution.
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Old 09-27-2012, 07:43 PM   #14
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You're looking at it the wrong way.

Save as much as you can afford to save using dollar amounts (today's dollar). Look toward the finish line, not the part of the track that the horse in running on now. It's all about how much you have at the end of the race.

If you can afford to save 15% (or dollar amount equivalent), go for the gravy.
I like this. When we started in our twenties, we contributed about 15% and spent the rest. These days we spend only what we must (needs, plus some selected wants) and throw every other dollar into our retirement planning. It's a race to the finish, but instead of feeling tired/deprived we are enjoying the momentum.



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Old 09-28-2012, 01:32 AM   #15
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When you figure your savings for retirement do you count what your employer matches?
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Old 09-29-2012, 07:33 AM   #16
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What is this "employer match" of which you speak? :-(
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Old 09-29-2012, 08:04 AM   #17
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I have never included what my employer matches in my calculations. Guess it depends on how you look at it. To me, my saving percentage is the percentage of my salary that I save. I count the employer matching as a benefit, not salary. Just my opinion, but I don't think there are any right or wrong answers.
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Old 09-29-2012, 08:08 AM   #18
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What is this "employer match" of which you speak? :-(
If you have a 401k plan set up at work, some employers will match a certain percentage of your contributions. Government agencies frequently do this, too. The matching rate is based on how much you contribute. I always made sure I put enough in to max out my employer's match.
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Old 09-29-2012, 08:22 AM   #19
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I absolutely count the match. The dollar the employer provides through a match is no different than the dollar I provide. However I feel the debate doesn't mean anything. Each person needs to determine how much they will need to support their desired lifestyle. From that, guesstimate what savings rate will be required to meet that goal and then double it. In addition steal a little bit from yourself each week and put it in a savings account. Now nearing the end of my worklife I look back on this plan and see it has been very good to me.
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Old 09-29-2012, 08:44 AM   #20
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During our accumulation years, I/DW never counted any employer match.

It didn't mean much to our total savings. We both contributed the maximum allowed to our respective IRA's (1982-2008) through the deductable, non-deductable, and Roth IRA "instruments", offered through the years

In addition, we contributed much more than the annual limits to our respective 401(k)'s and took advantage of the increase in contributions allowed for those over 50. We retired before Roth 401k(s) were offered at our respective companies, so that did not make a difference. If we were still w*rking, we certainly would have contributed to those, rather than the regular 401(k)'s. Heck, you work with what you have. At least we're carrying tax benefits forward from our non-deductable TIRA contributions we made when they were available (1988-97).

Even though we contributed "above the line" to our respective 401(k)'s, the "excess" was just considered taxable and was recovered at the time we did our respective rollovers, at retirement. We each received a distribution that was used to help fund our respective "cash buckets" to maintain our 4-5 year gross income target (now reduced to 3-4 years, due to DW's two small pensions starting in 8 months, and her FRA SS a year after - at which I'll clam 50%).

The employee match was such a small part of our overall saving/investing rate it was not really worth counting or worrying about. We just considered it "gravy" to our total retirement saving/investment plan.
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