Should You Include Your Employer Match In the 20-25% Investing Goal?

Wade has a question about saving 25% and when to include the employer match in his retirement savings plan. He and his employer both contribute 12.5% to the 401K, but he feels like he needs to contribute more. The key to replacing a large portion of your pre-retirement income is to start saving as early as possible and aim to save 25% of your gross income. The earlier you start saving, the less you may have to save each year, and the later you start, the more you'll need to save. The 25% goal gives you the highest probability of achieving financial independence, which means having enough saved to cover your living expenses without relying on a traditional source of income. Wade asked about when to include his employer match in his retirement savings plan. This decision depends on your household income and whether or not you plan to rely on social security in retirement. If your household income is greater than $200,000, it is recommended that you not count on social security and instead focus on maximizing your personal savings and employer match. On the other hand, if your household income is less than $200,000, you may still need to rely on social security, so you should include the employer match in your retirement savings plan. In conclusion, saving 25% of your gross income is a great goal to aim for, and including the employer match in your retirement savings plan depends on your household income and whether you plan to rely on social security. By taking advantage of your employer's 401K match and starting to save as early as possible, you can give yourself the best chance of achieving financial independence and a comfortable retirement. To learn more, check out our Know Your Number Tool.