How to calculate a mandatory pension contribution into take-home pay?

[latebloomingonion]

Every paycheck I have a mandated 8% contribution to our pension.  I'm wondering how to incorporate this number that I contribute when calculating my savings rate? 

MMM says, "** definition of take-home pay: gross income minus all taxes."   Do I include my pension contribution as a "tax" ?  Or, as my take-home pay? 

Thank you!

[Monkey Uncle]

You'll get it back (and hopefully a good bit more) when you retire, so I would count it as part of your take home pay and savings.  Although I suppose you could make that same argument about your social security and medicare taxes...

[latebloomingonion]

Thanks for your help.

[FIRE Artist]

I would also include your employer's contribution to your pension, if any, as part of take home pay too.

[latebloomingonion]

Just to make sure I'm understanding this (not great with math and these are hypothetical numbers).

Say my gross monthly pay is $11,200.  I pay $4,000 a month in taxes and I pay $900 a month towards a pension.

Would my take home pay be calculated as follows:
Gross monthly: $11,200
Subtract Taxes:$4,00
-------
Take home pay = $7,200? 

Or, do I subtract the pension contribution as well, so take home pay is $6,300??

Thanks, I just want to make I am fully understand and prepared . 

[Monkey Uncle]

If you're counting your pension contribution as part of take-home, then you would not subtract it.

Maybe I should ask why you want to know your savings rate.  That might shed a little light on how to treat the pension contribution.

[latebloomingonion]

If you're counting your pension contribution as part of take-home, then you would not subtract it.

Maybe I should ask why you want to know your savings rate.  That might shed a little light on how to treat the pension contribution.

Good question.  I want to know my savings rate because I am trying to hit over 60% savings rate!!

If I was subtracting my pension from my gross  pay along with taxes I could hit this savings rate.  In my simplistic understanding it seems that a pension contribution is a savings just like contribution to a roth ira would be. 

Edit:
I was reading this MMM article on savings rate (http://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/) and if I follow that rule I don't even have to worry about what I do with pension contribution etc,. As that is something that I don't "take home" as its already deducted from my paycheck. 

[TheAnonOne]

If you're counting your pension contribution as part of take-home, then you would not subtract it.

Maybe I should ask why you want to know your savings rate.  That might shed a little light on how to treat the pension contribution.

Good question.  I want to know my savings rate because I am trying to hit over 60% savings rate!!

If I was subtracting my pension from my gross  pay along with taxes I could hit this savings rate.  In my simplistic understanding it seems that a pension contribution is a savings just like contribution to a roth ira would be. 

Edit:
I was reading this MMM article on savings rate (http://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/) and if I follow that rule I don't even have to worry about what I do with pension contribution etc,. As that is something that I don't "take home" as its already deducted from my paycheck.

IF YOU ARE DOING THIS FOR FIRE:

I would probably subtract your pension from both gross and net pay and only count the cash that comes home.

Now, lets say you have a 60% savings rate with your $6,200 take home.

Break out... try to follow along

Take Home: $6,200

Spending: $2,480
Spend Yearly: $29,760
FIRE #: $744,000

Now, as a follow up, IF YOU ARE AIMING AT FIRE, I would figure out what the early cash-out of the pension would be at your FIRE date. AKA: 5 years from now, I could cash it out for $50,000.

I would then take that off my FIRE #

$744,000 - $50,000

TRUE FIRE #: $694,000


NOTES
1. If you are not going to fire, and instead get a monthly payment from the pension, you would simply take that payment amount off of your monthly spending when calculating the fire number.
2. If you ARE going to fire but don't want to touch it, then never subtract it from your fire number. It will be a bonus, eventually.

[latebloomingonion]

Yes, reaching for FIRE!

I would probably subtract your pension from both gross and net pay and only count the cash that comes home.

Ahh, counting just what cash comes home makes it much simpler to understand!

Now, lets say you have a 60% savings rate with your $6,200 take home.

Break out... try to follow along

Take Home: $6,200

Spending: $2,480
Spend Yearly: $29,760
FIRE #: $744,000

Now, as a follow up, IF YOU ARE AIMING AT FIRE, I would figure out what the early cash-out of the pension would be at your FIRE date. AKA: 5 years from now, I could cash it out for $50,000.

I would then take that off my FIRE #

$744,000 - $50,000

TRUE FIRE #: $694,000


NOTES
1. If you are not going to fire, and instead get a monthly payment from the pension, you would simply take that payment amount off of your monthly spending when calculating the fire number.
2. If you ARE going to fire but don't want to touch it, then never subtract it from your fire number. It will be a bonus, eventually.

That's helpful!  Thank you.

[Monkey Uncle]

There is nothing particularly magic about a certain % savings rate.  And there is certainly nothing magic about it if you are achieving it by changing your accounting methods instead of actually saving more.  The more you save, the sooner you can FIRE. 

TheAnonOne gave some good advice that should help you determine how much you need to save up in total.  If the question is, "how much of my income should I save each year to achieve FIRE as fast as possible," the answer is "as much as you can stand."