Today I was looking through my 2025 budget, paystubs, and 40k/IRA transactions in an attempt to see if I was meeting my goals or if anything stood out.
Then I started wondering if how I defined my savings rate is appropriate or how others did. I added up all money I put in my HYSA, HSA, IRA, and 401k then divided by my gross income – 12.98%. Then I thought well my company 401k and HSA match is immediately vested and accounted for nearly half the amount of money invested in my 401k and HSA this year. Should I include that too? 19.14% if I include the match.
Then I wondered should I be dividing by my gross or net income? Because 401k and HSA are pre-tax but my IRA is Roth and HYSA is post-tax – does that matter at all? Dividing by gross income makes the most sense to me, but curious to hear what you all think.
I'm hoping to get up over 20% this year!
How do you all define your savings rate?
byu/Rusty-Shackleford23 inpersonalfinance
Posted by Rusty-Shackleford23
15 Comments
> Should I include that too
If you include that too, you have to add it to your income.
So if you got a $6k match and make $100k, the equation should be (total savings)/$106k
You can calculate the savings rate on both gross and net income. Taxes and benefits are still technically expenses. I do all savings over gross income and cash savings over net income.
I always include employer match since it’s still money going toward my future, even if I didn’t “earn” it directly. Makes me feel better about my rate too lol
For the gross vs net thing, I stick with gross since some of my savings are pre-tax anyway and it keeps the math simpler
For me:
Gross income
Investments only (cash and emergency fund don’t count)
Employer match counts
Shootingnfor 20-25% currently; there were many years we were happy with 10% and a few years where we did even less…..it’s rarely a straight path
I don’t bother keeping track of my “savings rate”. I have a defined set of goals with timelines and save accordingly to reach those timelines.
( Savings + company match ) / gross income.
I assume you are calculating your savings rate for comparative purposes. If so, use whichever calculation matches that you are comparing your rate of savings to.
Your accumulation of, or use of, net income is the only thing that matters, and the only thing that you have control over. Use of gross income figures are suitable for tax purposes, e.g. tax efficiency. I think it is more productive to focus on metrics & calculations that comparatively analyze your management of monies that come into your possession, rather than tax monies that you never see.
Savings rate is the percentage of your gross income that you save. If you include employer matches as part of your gross income then it should be counted…if you dont, then it shouldnt.
If you want to count employer matches in your savings rate calc…then at least add it to your gross income too.
As long as you include the company match on both sides of the equation for consistency, it doesn’t really matter if you count it or not. I also use gross since most of my savings comes from pre-tax income via HSA/401k contributions.
My wife and I just look at what comes into our hands net of taxes/medical deductions. We add the pre-tax contributions as both net income and an outflow, even though technically our taxes would change if we changed those contributions. Looks like this – https://imgur.com/a/budget-spreadsheet-NKEcbYx I also get a 6% 401k match and a 6% contribution into a cash-balance pension plan, but I don’t count those as part of my savings rate. I do count them when running retirement calculators. Even though vacation is listed under “Saving,” I think of that as spending, that’s a very short-term holding.
13% of gross is very solid. Most guidelines put 15% as the number to aim for, so if you can comfortably move above that, you’re putting your future self in a good spot.
If you divide by your network income, it will basically artificially inflate your savings rate which is kinda silly. Absolutely include HSA and 401K matching.
I get a consistent bonus every year, but I only count my income as my base salary. All of my bonus goes into savings to top off the previous year’s Roth IRA contribution limits and the rest is rolled into my emergency fund.
Kind of depends on why im calculating it. If it is for retirement purposes I’d do money invested in an IRA, 401k(or equivalent), HSA, any matching, and taxable brokerage account divided by my gross because the Years to Retire can be viewed as a function of % Income Invested and independent of absolute income. Mr. Money Mustache has a neat calculator showing this idea.
If I’m seeing how much money is not going to expenses to give an idea of exactly how much I could pull back in a catastrophic emergency, then I do any amount invested, I don’t include the matching, any amount going to a savings/checking or similar(bonds, bills, etc.), and compare that to mt gross.
I don’t count the match, because I look at savings as a sacrifice. But of course I include it in my retirement calculations.
Maybe a better question is where is that HYSA money going to end up?
I reserve money for necessary maintenance on my house (roof, furnace, windows, or an emergency repair) I look at that as savings as it is necessary. If I bought new carpet or something I wanted but wasn’t necessary I don’t include that as money saved.
I reserve money for vacations, but I don’t count that as savings.
I reserve money for my next car, and for maintenance but I don’t count that as savings because it is fairly predictable and my cars are better than absolutely necessary.
I count saving for the kid’s college as savings (that’s my mid range) even though I will spend it all before I retire.
I have an emergency fund I don’t mess with in case of a layoff or illness. When I was funding that I did count that as savings as it was necessary and can be used for retirement if I am lucky enough not to use it.
That’s just how I look at it, maybe the lines are arbitrary but it helps with budgeting and making sure I can reach my goals – Retire safely,
yeah, I don’t count the company match, and and I count savings / gross salary as my savings rate
I factor in the match when planning for retirement but not for saving rate. This wasn’t really intentional, I just didn’t think about it. After reading the comments here, I agree with the logic that your savings rate should be something that you are contributing to, so I don’t think I’ll add the match because it is povided to me.
I only count investments because what I put into my savings fluctuates and I don’t set hard goals. I mostly just try to maintain a number, sweep any extra into it at the end of the pay, and move it out when when the total gets too high. I would count it if I had a set allotment per pay.
For savings rate I do gross only. For any post tax investments, I add my estimated taxes back into the amount. This way I get a more accurate gross savings rate.
Saving equal to amount save over total income.
I usually put 1 month in the bank and 5 months in hysa. This is an emergency fund and not saving.
I put money to spend on big expenses in another hysa account. This is not saving.
I use .my fun money to buy stock. Because I don’t go out or vacation. I dont count this as saving.
I put money for my 401k. This is saving.