I think 20% is a great target savings rate for young people just starting out, although it’s not always possible to save that much due to student loans and lower-paying jobs right out of college. The most important thing isn’t necessarily how much you save starting out, but how much you increase it by over time. Even if you’re only able to save 10% of your gross income, if you’re able to increase that number to 15%, then 20%, 25%, etc. as time goes on, you’ll be in great shape.

Thanks, Johan! And cheers to paying off your loans and increasing your 401(k) contribution. That will give a nice boost to your savings rate. Also thanks for pointing out that error, I just fixed it 🙂

“Here’s what my paychecks look like if I contribute $0 to my 401(k) plan every two weeks:”

The “$0” is missing the “65” in front 🙂

That’s exactly right. It’s a little mind-boggling to realize how much you actually pay in taxes when you consider federal, state, local, etc. It really adds up. That’s why it’s so important to keep as much money as possible tax-sheltered.

Thanks for sharing, John! I’ll look into doing a similar post for a Health Savings Plan in the future. That’s another great way to save tax-free money – thanks for the idea 🙂

Thanks, Luxe! I like to think the charts add some extra context to illustrate my points. And 15% is great for a starting salary, that’s considerably higher than most people contribute when they’re just starting out. Also, I just copy and pasted my paycheck info from my employer online into Microsoft Excel and did some simple calculations there 🙂

What did you use to calculate the paychecks w/without the 401k contributions?