HomeRetirementA 5% discrepancy could means millions.

A 5% discrepancy could means millions.

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.



  1. I do not count the match as part of what I am saving because I have not saved it. I have lofty savings goals (as soon as I can get out of debt).

    I work with many people who do not take advantage of the match and that continues to shock me. Passing on free money must be the dumbest money move ever.

  2. I wrote about a bit of a different answer to this question here:

    I don’t have the luxury of a match, but I think I would make calculations considering it. If I did count it, I would want to save enough so that we are projected to far exceed our minimum balance necessary.

    The other thing people don’t distinguish between (in blog posts, anyway) is already-taxed and yet-to-be-taxed money. The same balance in a traditional IRA vs. a Roth IRA has very different net payouts.

  3. Certainly I count it. If I put 10% of gross into a tax-deferred 401(k) and my employer puts in 3%, then 13% is being paid into my account. As all the money is coming from my employer anyway and it’s all part of my account, I don’t see why this is an issue.

  4. It obviously counts as long as the match is vested. If it’s not vested for a long time then I wouldn’t count it.

    Nobody is going to say “Ninja has more money than Kevin in his 401k because Ninja has $1,000,000 of his contributions and Kevin has $700,000 of his contributions and $300,000 of his employer’s matching contributions.”

  5. I find it easier to not count the employer match and then be pleased with the “bonus” each month. Otherwise one can get into weird money-percentage-continuum issues.

    For example, let’s say we are paid $50,000 a year, and we put in 15% ($7,500). If our employer matches up to 5% ($2500), we are now actually getting paid $52,500 a year ($50k base salary + $2500 matching). However, now that we are taking advantage of the employer match, our 15% is no longer 15%….. we are only contributing 14.2%. Where’d our money go!? OUR EMPLOYER IS GIVING US MONEY SO THEY CAN STEAL FROM OUR 401(k) ! ! !


    • I don’t buy this. Your gross remains your gross no matter what your employer contributes; otherwise you could repeat this same complaint ad infinitum no matter what the match. The employer indeed benefits from being able to deduct the matching contributions on their tax returns, but you as an employee still come out ahead from any 401(k) with a matching program.

  6. I count mine as well, not to justify lower saving but to give myself an accurate picture of what I am actually saving. I’ve always been a very disciplined saver, and therefore don’t run the risk of using my employer match as an excuse to save less elsewhere. That being said, for those new to the game, excluding the employer match could be a wise move, as it will encourage higher personal savings rates from the get go.

  7. I would count it in – makes sense to me. But I personally don’t worry about it. We max out our 401K’s and then save another 70+% of our take home pay.

  8. I started counting it once my employer pension contributions (5%) had vested. I had to work with the same employer for 4 years before if I left the company (which I haven’t) they wouldn’t be able to claw back their portion.

    I purchase shares through work as an investment for retirement – but don’t know if I should include that in the percentage because it’s not technically in an RRSP.

  9. I’d say if u wanna be conservative which is always a good idea (cause $#!t happens) then don’t factor it in to your goal.
    But if you wanna be mathematically accurate (OCD peeps), add the match into total gross income then find out what your percantages are.

  10. I count my employer match as part of my 401K balance because it is fully vested. Counting my employer match doesn’t discourage me from trying to figure out how much more I can save for retirement. Right now I am contributing 11% plus 7% employer match. Every raise I get will go to increase my retirement contribution until I max out my $17,500.

  11. Dave Ramsey doesn’t count the match (I’m 90% sure). I say contribute whatever will get you to your retirement number by the time you plan on retiring. A universal percentage just doesn’t work. I currently only contribute 6% with a 1.5% match (boo!). But that’s because I’m working my way out of debt. After I’m debt free, I need to reevaluate.

  12. I prefer not to include the match towards my goal. First off, the money is not mine. It was my employer’s. Secondly, I would like to surprise myself when I see how my previous employers have shared to my retirement.

  13. I don’t count my employer contributions because it’s not a match. I get 6.3% profit sharing if we have a decent year but the money goes into a separate fund and I don’t get to see it or choose how it is invested. My husband counts his match, so his 7% plus 3% match gets him 10% and I just contribute 15% plus put money monthly into my Roth IRA to account for my side job. I’m a bit more paranoid about living in a box on the street than he is.

  14. I don’t count the match towards my goal. I mentioned in a comment from your last post that my employer provides an extra 10% gross of my salary, deposited into a fund of my choice for retirement. We also max out a Roth IRA for both my husband and I every month, which adds another 15% to our overall contributions to retirement.

    I have no 401k because I work for a non-profit, and because I work for a non-profit, I want to make sure to make my own contributions as well. I do count my vested portion in my net worth, and I am almost there. I’m with you Ninja…it could mean the difference a million dollars. Especially for us twenty-somethings.

  15. I never count it and have always tried to ensure I hit my target of x% before company match. I’m at 24% plus company match to the 401k, 20% after tax to a stock purchase plan. We also Max out roth’s for my wife and I.

  16. Unfortunately, I do not get a match! I view a match as a bonus or a better return. It usually has a vesting period which means it doesn’t become mine for a while.

  17. I, personally, don’t count the match. I don’t consider my employers’ match as part of my income.

  18. I am putting 25% in my 401k. I don’t count the match (and am a little fuzzy as to how much they are matching, but it’s not much).
    My husband maxes out his 401k (I think that’s about 15-20%) and we each put $4800 per year in a Roth. All told we are saving >25% in retirement accounts and an additional $400 per month in an EF.
    I do not think that when we retire we will think, “Drat, wish we hadn’t saved as much for retirement.” In fact, I am now thinking of getting even more hardcore and really working on slashing our expenses so that we can retire earlier.

  19. I count it. My employer sends me a statement each year of how much I actually earn — including benefits. I consider the match as part of my income. I work for a nearly extinct type of organization that provides 5% match on voluntary 401k contributions PLUS a traditional pension plan that employees are vested in after 3 years of service. Right now I’m not personally contributing as much as I’d like to the 401k. The match/pension gives me some peace of mind while I work my way up to contributing more.

  20. Sure, it counts. A dollar for dollar match on, say 10%, is identical to you depositing 20% yourself. But. When planning for retirement, it actually pushes the required savings a bit higher as you are living on 10% more money. For get taxes for a moment. Your replacement income needs to be 90% (If you’re budgetted that tightly) vs the guy who have no match, saves 20% and lives off ‘only’ 80% of income.
    I’d look carefully at your ’12 tax return, to see what bracket you fall into. You may be pre-taxing your way down to 15%. If so, time to use the Roth 401(k) if you can.

  21. I don’t count the match, mostly because I could potentially lose it at anytime. (although I work for an internationally renowned company, so probably unlikely any time soon)

    As a single person living in a pretty HCOL area, I “only” contribute 13% to my 401K and Roth IRA. it’s the most I can muster at this point. Some months it hurts but when I get the overtime, it’s not so bad!

  22. I was just thinking about this today. I was crunching some numbers and yeah, that extra few percentage makes an absolute huge difference. I put around 15%-20% away including employer contribution.

  23. Are employer match contributions into a Roth 401K taxed upon withdrawal? Does that change the calculation at all?

    • You deposit to the Roth 401(k), but any match is deposited to the traditional, pretax 401(k). So, it needs to be factored into at some point.

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