Company match as part of your % saved?

[halv45]

I hear people say you should ave 10% or 15% or whatever.

Do you consider your company match as a % of how much you save?

Say you put away 5% and you company matches 5%. Do you consider that "saving" 10%?

 

[steelyman]

I hear people say you should ave 10% or 15% or whatever.

Do you consider your company match as a % of how much you save?

Say you put away 5% and you company matches 5%. Do you consider that "saving" 10%?

I never got a company match, as a state employee. So the answer is no.

 

[Fishingmn]

I didn't but I can understand the rationale to think that way.

That said, I think most people would say that saving 15-25% of your regular income is more in line with what you need to do in order to retire early. I know I saved 9% in my 401k and 15% in my ESPP so it was 24% off the top out of my paycheck in addition to what else I could save.

 

[martyb]

I currently save 35% of my gross pay. Wife saves 30% of hers. We don't have especially big salaries. I max my TSP, she only contributes the 30% because that's all we can afford. As soon as I retire sometime this year, we'll double her 401k contributions to 60% of her $24k salary. I don't get any employer match on my TSP, she does get a 4% match plus profit sharing.

 

[HighRoller]

I didn't when I was working and getting the match but I can see why someone would count it. To me I always thought of it as interest (pretty good interest too )

 

[ClockWatcher]

Do you consider your company match as a % of how much you save?

Say you put away 5% and you company matches 5%. Do you consider that "saving" 10%?

Because my match vested two years ago (the first match I’ve had out of four different jobs), I now count it as part of my portfolio, but I usually don’t include it when I calculate my savings efforts. To me what matters is my fiscal discipline, and I want my current numbers to be as comparable to my past efforts and opportunities as I can make them.

My average annual savings rate of pre-tax income is 27.6%, with 2012 reaching 43.8%. My average annual savings rate of post-tax income is 38.4%, with 2012 reaching 60.5%. As of last year, my DW has recently been saving a similar amount. Having recently replaced the 12 year old car we had however, I don’t expect 2013 to be quite as good a year.

 

[AndrewJackson]

Because my match vested two years ago (the first match I’ve had out of four different jobs), I now count it as part of my portfolio, but I usually don’t include it when I calculate my savings efforts. To me what matters is my fiscal discipline, and I want my current numbers to be as comparable to my past efforts and opportunities as I can make them.

My average annual savings rate of pre-tax income is 27.6%, with 2012 reaching 43.8%. My average annual savings rate of post-tax income is 38.4%, with 2012 reaching 60.5%. As of last year, my DW has recently been saving a similar amount. Having recently replaced the 12 year old car we had however, I don’t expect 2013 to be quite as good a year.

You have kids? That is quite a savings rate.

 

[ClockWatcher]

You have kids? That is quite a savings rate.

Neither my wife nor I wanted nor have any children. I don’t think we could have saved what we did if we did have children. I have been motivated toward early retirement for many years (albeit with some waxing and waning in my determination). My wife is a much more recent convert, having grown into it since meeting me four years ago (and not without some friction along the way ).
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[foxfirev5]

If you add the match to your income for the calculation I guess that would be accurate. However the big issue is what will it take in absolute dollar values to reach your goal. It doesn't matter if its your dollars or a match. I wonder if 10% would get you to your number with or without a match.

I remember years ago advisors making statements that it's not important how much you save but how regularly the contributions are made. Ah, the good old days of 20% equity appreciation and 6+% interest yields. Not so much anymore.

 

[bUU]

Definitely don't count the match until after it vests... effectively consider it as contributions in the month it vests, not the month it is originally credited.

 

[keegs]

I would include the matching contribution but as others have mentioned be careful to understand what they're matching and only after any vesting period has ended.

Some plans only match pre-tax contributions and/or don't match pre/post tax catch up contributions. HCE limits can also factor in.

Start early and save regularly. We've been at it for almost 30 years now and it's a great feeling to have it under us at this stage of life.

 

[padlin00]

I've not seen any "expert" recommendations for how much to save be stated as anything but a single figure, as in 15% or some such, so I combine.

 

[FIREmenow]

We didn't look at it that way at all. We reversed that thought process: "What percent of our income could we live on without sacrificing much, knowing that we wanted to retire early?" Then everything else went to savings.

A bonus at work, for example, didn't mean an upgrade to the car, it meant a pay-down of the mortgage principal.

EVERYTHING else went into savings. We have never owned a house larger than 1500sqft, for instance.

Having one child made that number variy A LOT, however, constantly changing with school, etc. We were fortunate to both have worked hard in school an both have good technical jobs.

But it was never about saving a fixed amount and spending the rest as "surplus". It was living on a fixed amount (as well as could be) and SAVING everything that remained each month.

I would guess, on average, our savings rate was about 40% over the last 25 years.

May not work for all, but it worked well for us.

 

[panacea]

We included all company contributions in our savings rate now that we're vested in these amounts. Doesn't really matter how the money got there as long as it's there. Our personal retirement saving rate is 27%, or more like 32% when including employer contributions. We also keep track of our overall savings rate, which includes saves for intermediate-term goals like car replacement, college, etc., which increases the saving rate by another 15%. We figure saving this much of our income will not only get us to FIRE sooner but also make for a nice transition to retirement in that it forces us to spend at a rate far below our actual income. We should be able to have the same comfortable lifestyle in retirement as we do now at about 50% of current income.

 

[Sesq]

I put in the numerator and the denominator. I am vested. But its usually just a curiosity check. I get a lot of variable comp so my savings rate and plan bounces around a bit.

 

[GalaxyBoy]

Not sure I really care about what fraction of my salary I'm saving; I just care about whether I'm saving enough to meet my goals. I also make sure I include the employer match in Firecalc when figuring how much I'm saving each year.

 

[Tom52]

We save approx. 24% of gross income in pretax 401K & wife's TIRA. All pretax retirement options are maxxed out. In addition we are saving approx 19% of our gross income in my Roth IRA and other after tax retirement accounts.

We also save 100% of any yearly bonus into after tax retirement account. The last bonus was = to 3.5 months salary.

Company 401K match = 3.5% of gross salary, but not including bonus. (cheap b*stards, it used to be 6%)

I am not sure how I would assign an overall % since some is pre tax and some is after tax savings.

 

[growing_older]

I have always ignored it. Many times there was no match, or the job (or company) didn't survive long enough to vest. I don't figure it in my "savings rate" but if it's vested I'll include it in my total assets. But then, I don't really focus much on savings rate either. I've figured it out a few time when I'm curious because people are posting about it, but for myself I've been much more focused on total account balances and what rate of withdrawal will support what rate of spending in retirement. The match contributes, but only a little.

 

[MichaelB]

I hear people say you should ave 10% or 15% or whatever.

Do you consider your company match as a % of how much you save?

Say you put away 5% and you company matches 5%. Do you consider that "saving" 10%?

What matters isn't so much a percentage, it is saving enough to fund your spending from the day you stop working. If you are setting aside 5% of your salary, that means you are spending the other 95% (including taxes), so you're going to need to save more or spend less later in life.

 

[Huston55]

What matters isn't so much a percentage, it is saving enough to fund your spending from the day you stop working. If you are setting aside 5% of your salary, that means you are spending the other 95% (including taxes), so you're going to need to save more or spend less later in life.

+1

The % of salary saved vs the number of years to become FI is what's most important IMO. This link from our buddy Nords illustrates the relationship very clearly.

How many years does it take to become financially independent?

Using this formula, the matching should probably be considered as "bonus" (not in the calculation) or at least discounted because, the math is about "how much you're NOT spending" of your own salary. Also note that SS and any pension are a 'bonus' that would accelerate these timelines.

 

[Semiretired2008]

I hear people say you should ave 10% or 15% or whatever.

Do you consider your company match as a % of how much you save?

Say you put away 5% and you company matches 5%. Do you consider that "saving" 10%?

Nope, the company match is gravy. I like gravy.

And definitely if you do count it - then make sure you are fully vested and beyond. I had one company that changed their fully vested time line and grand fathered every one over the last five years - I was within that five years and missed being fully vested by 3 months... They changed it from five to ten years - I did not make it to ten years...

 

[RockyMtn]

Had a 6% company match. Never really considered percentage of salary that I saved to be important. Saving as much as possible regardless of the percentage was paramount. I did count the match as part of my yearly gain once it vested.

 

[cranberryjoe]

I never counted it because at my company it's too variable. Originally it was 6%, then it dropped to 4%, then no match for a few years, then it came back at 2%, and now the match is quarterly based on the company's quarterly financial results (which was 0% last quarter ).

I just made sure I was contributing the full pre-tax amount, which ensured I would also get any match. As a proponent of LBYM I saved as much as possible. I never calculated my exact savings rate, but it's been somewhere in the 30% to 40% range for a very long time (no kids).

 

[bubblehead]

if your getting 5 percent free money it sure is part of your savings. it does not mean you should not be putting in the max

 

[scrabbler1]

Similar to Cranberryjoe, I never counted it in my percent saved because it was too variable, too muddy to figure into the calculation. I also wanted to review my percent saved as that of my salary+investment income outside of my retirement accounts.

For my first few years of working, the company matched at 50% of the first 6% of pay into the 401k. But just around the time I became vested, they raised it to 75% of the first 6% of pay.

A few years later, my company began its ESOP plan which was a blob of company stock based on a percent of your pay. That percent varied a lot from year to year and was held in a separate account from the 401k. The vesting rules were slightly different, too.

A few years later, the company merged its ESOP and 401k plans (and streamlined the vesting rules) and allowed us to divest a portion of the ESOP and put its proceeds into the 401k.

So, if I included the match and the ESOP, both "free" money, it would make my savings rate pretty complicated. Therefore, I never included either one in my personal savings rate. As for calculating a rate of return in my 401k and ESOP, I usually looked at only the one excluding the company match. However, I also kept track of the 401k with the company match to get an overall rate of return. I also looked at an overall rate of return without the company match but with the ESOP to see how each investment was doing.