According to economist Jack VanDerhei, the typical “best scenario” American family is saving around 9% of their salary in their 401(k). But by his estimation, the average American family needs to be saving up to 18% of their salary consistently for thirty years in their 401(k) to be able to maintain their pre-retirement standard of living. The 18% includes both employee contributions and the employer’s matching contributions.
I save 6% of my salary and my employer adds a 40% match, so my total savings rate is 8.4% of my salary. Him saves 3% of his salary and his employer adds a 100% match up to 3% of his salary, for a total of 6%. We’re a long way away from the 18% we need to be saving. Fortunately, we’re starting young. Our first priority is to eliminate our debt. After that we can ratchet up the savings.
If you will rely solely on your 401(k), are you saving 18%?