Different in pre-tax and after-tax retirement savings.

[cstar]

Hi all.

So, I've been trying to figure out exactly what percentage of my salary I am dedicating toward retirement savings.

My annual salary is $55,000 +/-. After taxes, I take home $42,510 +/-.

I work in local government and $400 of my bi-weekly paycheck goes into a 457 plan (similar to 401k). Approximately $10,400 and 19% of my pre-tax income annually. My employer also kicks in a tiny bit.

I also fully fund a Roth IRA each year. At a $5,000 maximum contribution and 12% of my after-tax income.

Question is, how do I go about calculating what my total salary savings is since one is from pre-tax income and the other is from after-tax income? It seems to me like it should be easy to figure out but for some reason I'm struggling.

I also have a pension plan but given the current state of public employee pensions, I'm hedging my bets on my private investments. The pension will be just a bonus.

Please let me know if I didn't provide enough information or if I'm just being silly for trying to figure this out. Thanks!

-C

[disneysteve]

10,400 + 5,000 = 15,400
15,400/55,000= 28%

[kork13]

10,400 + 5,000 = 15,400
15,400/55,000= 28%

....which is to say that it's simplest if you only concern yourself with your gross income (total income before taxes). You won't know your true tax bill until you file your return anyway. In the end, taxes is just another expense, so treat it as such. Bottom line: you're saving ~28% of your income toward retirement -- that's great!

[disneysteve]

Bottom line: you're saving ~28% of your income toward retirement -- that's great!

Yes, at least on the surface, 28% to retirement is great. I do wonder, though, what the rest of your financial picture looks like. Do you have an adequate emergency fund? Are you debt-free? Do you have savings set aside for short-term needs and goals? Putting 28% to retirement is only great if other needs are also being attended to.

[cstar]

Thanks, DS. I just wasn't sure if it should all be calculated from the $55,000 income since the Roth contribution is from after-tax income.

And yes, I'm very aggressive toward retirement savings (I am 26, btw) because I am currently seeing my parents struggle with the lack of savings they have accumulated over their lives. They are both in or near retirement age but really have no option to retire. This is not something I want for myself so I am being overly cautious.

My EF will currently cover approximately 6 months expenses (and am putting $400 a month toward it to increase). I DO have approximately $50,000 in grad school loan debt and currently put $750 a month toward that. I would certainly like to put more toward that to pay it off earlier and I plan on re-adjusting my retirement savings after seeing just how much money is going toward that. I have approximately $25,000 in retirement and seeing as I am still fairly young, now would be a good time to dedicate some of that income toward the loan.

[CoolHandLuke]

G J

I'm not familiar with that type of retirement savings plan but it sounds great 19% is a huge number to contribute and if you can keep it up you'll be in good shape, I was contributing 16% to my 401k but recently cut it back to 6%, I kinda with I hadn't but I also wanted more money NOW. Anyway it depends on your situation and the interest rate of the loan what's best, but you definitely have a great start considering your age, keep it up!