Savings Rate with Gov't DB Pension Contributions?

[powersuitrecall]

We are a family with 2 Gov't workers (and 2 kids).  For the most part, I consider our savings rate to be: (amount saved / net income).  I don't count the pension contributions, because it just sort of happens in the background. 

But, it's a big part of our savings.  At the cost of straining our arms with self congratulatory back-patting, I'd like to figure out what our "real" SR is ...

Gross Pay	$ 140,000
Taxes	$  30,000
Net Pay	$ 110,000
Pension*	$  40,000
Spending	$  50,000
Savings	$  60,000

*Pension amount is derived from the present worth

SR = ( Pension + Savings) / Gross Pay  = (40,000 + 60,000) / 140,000 = 71%

Am I right with this calc of SR?

[Left]

Unless your pension match is $40k for the both of you, I'd just include the pension match as the savings for time being because the pension isn't paying out yet

Kind of like counting the match on 401k, you don't count the "growth" of the money already there as part of the savings rate, so why do you do count the rest of the pension as part of savings

IE if govt pays 11% and you pay 1%, then just count the 10% difference X salary for the savings rate

I don't know, I never really counted the pension as part of the savings rate itself, kind of like how people don't count social security into their savings rate, plus if someone wanted to retire early, in 30-40s, a pension wouldn't be much help because you can't draw on it, outside of retired military at the old age of 38 if they joined at 18

[powersuitrecall]

Unless your pension match is $40k for the both of you, I'd just include the pension match as the savings for time being because the pension isn't paying out yet

Kind of like counting the match on 401k, you don't count the "growth" of the money already there as part of the savings rate, so why do you do count the rest of the pension as part of savings

IE if govt pays 11% and you pay 1%, then just count the 10% difference X salary for the savings rate

I don't know, I never really counted the pension as part of the savings rate itself, kind of like how people don't count social security into their savings rate, plus if someone wanted to retire early, in 30-40s, a pension wouldn't be much help because you can't draw on it, outside of retired military at the old age of 38 if they joined at 18

Perhaps I should go into detail about how I derived the figure for pension above.

If we both left today, we would receive a bulk payment of ~$40,000/year service.  About half would be tax sheltered (I assume this is the portion that we have contributed?). The other half would count as taxable income (I assume this is the portion that is "matched" for us).

So, what you are suggesting is that only the "Pension Contribution" portion should be counted as savings, ie:

Gross Pay	$ 140,000
Taxes	$  30,000
Net Pay	$ 110,000
Pension Contrib	$  20,000
Pension Match	$  20,000
Spending	$  50,000
Savings	$  60,000

SR = ( Pension Contrib + Savings) / Gross Pay  = (20,000 + 60,000) / 140,000 = 57%

?

[forummm]

You would get paid $40k for each year you worked? That's insane!

[powersuitrecall]

You would get paid $40k for each year you worked? That's insane!

That's for 2 of us (so $20K/year each).  Yes it's insane.

[mld]

Family of 2 gov't workers here as well :). That is not how I calculate it for my savings rate.

I take the figures on our T4 and do the following calculations:
Gross income + Pension Adjustment (this is your pension contribution + employer match) - RPP (your contributions to the pension) = Gross Income with Employer contributions

Then from that number I remove all other Costs/taxes listed on there (CPP, EI, Union) and my end of the year taxes.

That gives me my net annual pay or my take home pay.

My savings rate therefore is (Net Annual Pay - Spending) / Net Annual Pay.

[frugledoc]

You would get paid $40k for each year you worked? That's insane!

Not really, DB Pensions are really deferred salary.  Would it be insane if the salaries had been 20k higher per year?

[c-kat]

I just add the pension adjustment amount that is on my T4 to my savings and count that as my total savings amount.

[powersuitrecall]

I just add the pension adjustment amount that is on my T4 to my savings and count that as my total savings amount.

Cool.  That is probably the most conservative way to do it.  Thanks.

[mustachianteacher]

I just add the pension adjustment amount that is on my T4 to my savings and count that as my total savings amount.

Cool.  That is probably the most conservative way to do it.  Thanks.

That's more or less what I do. (I think.) We're both government employees too, and we contribute close to 10% of our salary to our pension. I figure out the dollar amount of that 10% per year, and then add the dollar amount of our own pre-tax (403b) and post-tax savings, and add it all up. That gets divided by our total annual income, and that's our savings rate.

I ignore the amount my employer kicks into the pension, I ignore the fact that probably 3 or 4% of my income goes toward union dues and other job expenses, and I ignore taxes insofar as I use my annual income as listed on my employer's salary tables. I also don't count debt repayment or the principal of our mortgage payment as savings because that feels a little too much like massaging the numbers.

This has always given me a fairly modest number compared to what some folks here manage to save, but now I'm curious what my rate would be if I were to add in employer contributions, and deduct taxes and job-expense deductions. Hmmmm....

[powersuitrecall]

I just add the pension adjustment amount that is on my T4 to my savings and count that as my total savings amount.

Cool.  That is probably the most conservative way to do it.  Thanks.

That's more or less what I do. (I think.) We're both government employees too, and we contribute close to 10% of our salary to our pension. I figure out the dollar amount of that 10% per year, and then add the dollar amount of our own pre-tax (403b) and post-tax savings, and add it all up. That gets divided by our total annual income, and that's our savings rate.

I ignore the amount my employer kicks into the pension, I ignore the fact that probably 3 or 4% of my income goes toward union dues and other job expenses, and I ignore taxes insofar as I use my annual income as listed on my employer's salary tables. I also don't count debt repayment or the principal of our mortgage payment as savings because that feels a little too much like massaging the numbers.

This has always given me a fairly modest number compared to what some folks here manage to save, but now I'm curious what my rate would be if I were to add in employer contributions, and deduct taxes and job-expense deductions. Hmmmm....

The principal portion of your mortgage should absolutely be counted as savings.  If it weren't, one could refinance for a longer amortization, spend more and still have the same SR.

On the other hand, the best part of calculating a SR # is really to compare against one's self.  As long as everyone is internally consistent, who cares what other people say is right :)