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 have looked like so far for 2014…
401K: 10% of gross income
Roth IRA: $5,500 (which is 6.7% of gross income).
As our income has increased, we’ve been able to send more discretionary income to retirement, (I started with 5% contributions in 2007).
There’s something missing though, I also get a full 5% match from my employer for my 401k contributions. So, although I am personally only sacrificing 17% of my pay for retirement, I’m really getting 22% socked away for future me.
So my question is simple:
When the talking heads state one should be saving 15% towards retirement, are they factoring in the company match? Or another way to think about it, would you say I am investing 17% towards retirement, or 22%?
It’s an interesting question, one that could literally mean the difference of a $1,000,000+ come retirement depending on how one decides to proceed.
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 and it’s just a bonus.