Calculating retirement savings rate w/ match

[MD & DPT]

How do you all go about calculating your retirement savings rate with regard to a 401k match? Do you include that amount in what is needed to reach your determined percent or leave it out and treat it as extra.

[mamaham]

Leave out. It does not count towards recommended 20% saving for retirement.

[StarTrekDoc]

Up to you. 20% is a guideline. if it ends up 25% because of match; it'll up a nice surprise. To nickel/dime the savings to get close to 20% will more likely than not lead to harder lessons learned down the road.

[Tim]

Peds
Defined as adding to numerator and denominator.
(employee+employer)/(gross +employer)

The reason is, pretax. Post tax , and employer gives a consistent measurement in all cases.

Side note: best wishes Peds. Your contributions are missed by some.

[Otolith]

Up to you. 20% is a guideline. if it ends up 25% because of match; it'll up a nice surprise. To nickel/dime the savings to get close to 20% will more likely than not lead to harder lessons learned down the road.

Ya where did Peds and entdoc go?

To answer your question I place in numerator and denominator as well

[MPMD]

i personally just put it in the numerator for several reasons
a) it's absolutely my money
b) it's not like they let you add it to your spending money if you don't want it as a match

in my mind a good match is just someone else is contributing to my retirement.

you had a rich uncle giving you 10k/year to save for retirement (but only for retirement) i think it would be crazy not to count it and strange to act like it was just normal compensation.

[Tim]

i personally just put it in the numerator for several reasons
a) it's absolutely my money
b) it's not like they let you add it to your spending money if you don't want it as a match

in my mind a good match is just someone else is contributing to my retirement.

you had a rich uncle giving you 10k/year to save for retirement (but only for retirement) i think it would be crazy not to count it and strange to act like it was just normal compensation.

Would it be the same if it was $100k or $1m? The math seems to indicate that the after tax spending would be impacted as well. Uncle or employer, it is funds saved for retirement. A reliable source of "free money" I would count as "earnings". Actually, that was the main objective of passing through pretax retirement saving to dependents. The math has changed with the SECURE act but that is a different discussion. I would still count it in both the numerator and denominator.
Money available and money saved for retirement is the metric, regardless of source.

[jfoxcpacfp]

We include it in calculations to track client saving targets. What's most important is to set a definition of saving, monitor, and be consistent. Some of you get too far into the weeds (IMPO).

[bovie]

It’s money going toward retirement, and it’s part of your gross compensation.

So it goes in the numerator, and the denominator.

[MD & DPT]

Thanks everyone! Really appreciate all the great advice.

[Tim]

Your question is how to benchmark a retirement savings rate. There is no perfect benchmark. The important thing is the absolute value and consistency of the benchmark. Miss it by much and your financial life will require changes. Can be painful, self imposed rule. Much less important for "bragging rights".
If you want to use 18.5% of comp alone, go for it. or 22.5%. It is your benchmark. Don't fudge it to make it seem like a success or failure. Do not get into the weeds, like a nice relocation bonus. It is comp, subject to tax and is it subject to the 20% guideline? Silly to debate, your choice.