Just about every personal finance guru has an opinion on how much you should contribute to retirement. Their suggestions usually falls between 10% and 20% of your gross income. For as long as I’ve been at this personal finance thing (since 2007), I’ve decided to contribute no less than 15%.
Here’s what my retirement contributions look like for 2013…
401K: 13% of gross income
Roth IRA: $5,000 (which is 6.5% of gross income).
As our income has increased, we’ve been able to send more discretionary income to retirement, nearly 20% of my income. There’s something missing though, I also get a 5% match from employer in the 401k. So that really means about 25% of my pre-tax income is being stashed away for future me.
But when the gurus talk about retirement, what satisfies their stated 15% threshold? Is it simply what the individual contributes, or is the company match factored in to that equation? Or in other words, would Dave Ramsey say I’m investing 20% towards retirement, or 25%?
It’s an interesting question, one that could literally mean the difference of a $1,000,000+ come retirement.
When I asked this question on twitter, I got a 50/50 split. Half said they count the match towards their goal, while the other half said they pretend like the match doesn’t exist.