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Old 01-06-2020, 11:07 PM
 
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Hey guys - After researching and speaking with several financial advisors I have been told that the ideal contribution percentage to save for retirement is between 15% and 20% of gross income. My current employer offers 100% match on the first 6% that you contribute. Currently, I have my contribution set to 10% out of each monthly paycheck. Would my total contribution be considered 16% since my contribution is 10% and my employer is matching 6% or would I need to contribute 15-20% not including company match to hit the ideal percentage that most advisors recommend. Thanks!
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Old 01-06-2020, 11:49 PM
 
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Quote:
Originally Posted by CBN8819 View Post
Hey guys - After researching and speaking with several financial advisors I have been told that the ideal contribution percentage to save for retirement is between 15% and 20% of gross income. My current employer offers 100% match on the first 6% that you contribute. Currently, I have my contribution set to 10% out of each monthly paycheck. Would my total contribution be considered 16% since my contribution is 10% and my employer is matching 6% or would I need to contribute 15-20% not including company match to hit the ideal percentage that most advisors recommend. Thanks!
I would say most advisors would say you could treat it as 16%, assuming it vests immediately (or soon).

However, it really depends on your goals. Some people want to retire long before traditional retirement in their 60s. And some people are forced out of decent paying employment in their 50s, even though they want to keep working. So those are things to consider. Personally, I think the "retire at 65" model broke down a long time ago. Lots of people are being forced out of good paying jobs in their 50s, so I'd personally recommend saving more unless you've got a good amount in there already.

I like this chart from Mr. Money Mustache called "The Shockingly Simple Math Behind Early Retirement". Mr. Money Mustache's Chart uses after tax income percentages. So, if you're doing 16% gross, that's probably 20% after tax (conservatively..could be more depending on your tax bracket).

https://www.mrmoneymustache.com/2012...ly-retirement/

If you're not starting from 0, you can also use this chart from networthify (also included in the article):

https://networthify.com/calculator/e...thdrawalRate=4
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Old 01-07-2020, 12:32 AM
 
Location: Las Vegas & San Diego
1,074 posts, read 190,060 times
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The ideal contribution is to contribute the maximum - the 2019 employee limit of contribution was $19K, $25K if over 55, 2020 is $19.5K and $26K if 55+. That is before the matching funds, the employee + employer limit is $57K and $63.5K if over 55. With a 6% match, it would be impossible to hit the combined limits. If available, ROTH 401K is even better.
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Old 01-07-2020, 06:01 AM
 
13,103 posts, read 10,470,967 times
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Originally Posted by ddeemo View Post
The ideal contribution is to contribute the maximum - the 2019 employee limit of contribution was $19K, $25K if over 55, 2020 is $19.5K and $26K if 55+. That is before the matching funds, the employee + employer limit is $57K and $63.5K if over 55. With a 6% match, it would be impossible to hit the combined limits. If available, ROTH 401K is even better.
You're assuming OP has enough income that doing that won't put a serious strain on his/her other finances.

The median household income in the US is only about $59k annually, and this includes multi-person households.
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Old 01-07-2020, 06:26 AM
 
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I could never afford to max mine out, but I did contribute 15% of my own money. I ended up retiring due to disability, so I'm glad I put in all that I could.
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Old 01-07-2020, 06:31 AM
 
Location: The Triad (NC)
29,732 posts, read 64,840,621 times
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Quote:
Originally Posted by CBN8819 View Post
...employer offers 100% match on the first 6% that you contribute.
There ya go.
The question then becomes what to do with the REST of your save/invest commitment.
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Old 01-07-2020, 07:28 AM
 
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I think they recommend 15%-20% minimum based on what is needed to retire if you work normally. From this perspective they would include the 6% in that total.

They really should be pushing for you to keep contributing more until it becomes painful and then scaling back.
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Old 01-07-2020, 08:34 AM
 
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I think as much as possible for reasons already stated.

Personally, I have never contributed less than 15% and that is before the match. I do vary it from time to time.

When Pres Obama and Congress did that strange deal whereby everyone's Social Security contribution was reduced by 2%, I immediately upped by contribution rate by 2%.

Currently, I am doing 20% to reduce my taxes. It ain't easy. But that plus the 7.5% contribution rate by my employer might just keep me away from having to eat dogfood in retirement.
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Old 01-07-2020, 09:28 AM
 
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I do 10% and my employer does a 100% match on 6%. I then put the remainder of savings to max out Roth.

During the next recession I’ll hike it to 15%.
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Old 01-07-2020, 11:19 AM
 
27,407 posts, read 34,299,458 times
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I don’t have a 401k option, but I do contribute 20% to my 457b, and 5% to my pension fund (a required contribution).
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