The 6% Trap | How Employers Control Your Savings (and Why It’s Costing You)

00:00 Intro
00:16 Saving 6% (plus employer match)
01:35 Is It Enough?
03:10 Let’s Talk 6% or 9%
03:49 Average Age To Start Investing
04:24 Running An Example
06:19 Annual Withdrawal
07:00 “Everyone agrees that’s too low.”
09:26 Bloopers

Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.

Thanks for watching, I appreciate you!

[erinames]

Including my employer match I think I am right around 25%. I started when I was absolutely shoe string budget broke with $30 a month and slowly built up each time I could. In the last 5 years I have really made some huge gains. Now that my saving is a % based automatic set up any time I get a raise my saving amount automatically increases. It was very exciting to reach my first 100k. I love watching my money grow. I started out a teen mom on welfare and have worked my butt off with my husband and high school sweetheart to get here. I am not stopping or slowing down now. I am hopeful that I can not only retire one day but also leave something for my kids and maybe grand kids someday. With work and effort anyone can do it. Everyone said I was going to be a welfare drop out for my entire life (including my own mother) but I am so far from that. Make a plan and stick to it. It is possible!

[KentVessels]

I would like to add a little trap that you can run into. If you max out your allowable amount before the end of the year then they stop taking anything out so the company will stop contributing as well.

[richbarnes]

My Motto when it comes to saving, especially for retirement - "Give till it hurts. Your future self will thank you for it!" Do 401Ks, IRAs, etc..

[veri.contrary]

thank you for this concise explanation! i just accepted a salary position and the company is offering a dollar-for-dollar/100% match up to 5% 😯 i’m 28 and childfree, already saving 50-80% of my income since 2021. i have & live with a long term partner who’s also looking for work so we’ll be one of those DINK (dual income, no kids) very soon!

he owns our home and the mortgage + general expenses are low, this new position of mine is also fully remote so i’m happy to save on transportation costs by like 99% 😂

[Steve-wr]

I only ever invested enough in 401k to get the match, but then maxed out my and my wife's Roth IRA each of the last 27 years.

[johndimond]

I was very lucky to be introduced to the 401k in the mid 90's. I started out at 5% and increased by at least 50% of every raise that I got. Both annual and promotions. I did this until I hit the 401k max. I am now 54 and maxing out Roth 401k, ROTH IRA and After-Tax 401k. Forecasting to retire in 5 years with more income than I have today working.

[daveschmarder-]

I worked for a very small company. There was no retirement plans, no matches or anything.
I knew that I would not make it on my good looks, so I put away a substantial part of my fairly low wage. Now at I am old, it is a good thing I did. I didn't have a pretty face then and there has been no improvement over the last 50 years.

[loborocket]

I started at 25 with "save 10%" in my mind plus whatever employer match I got. At my current company, I have been saving more, setting my percentage to increase by 1% each year. My employer match is dollar for dollar up to a max of $4500. At this point I am maxing out (plus catch up) 401K. Max out ROTH accounts for my wife and I, max out HSA (~$2000 match there from employer), and save 15% of my salary in an employee stock purchase plan where I get a pretty good discount and then rool proceeds from that into a brokerage account regularly. All of that combined adds up to a pretty big amount (I think it comes out to about 41% of my income) of savings each year.

[johnlittle]

The worst thing anyone could do is discourage an immediate 50% return on your money that you've earned as an employee. As long as you are AT LEAST putting in the 6%, you are doing the right thing. Putting more is great if possible.

[JasonWynn]

I started investing 6% at the age of 24 because my employer at the time matched 100% up to 6%. Later my match was less and I increased my contribution to 10%. Since 2019, I've been maxing out my 401(k) including catch up contribution since I turned 50.

[rab]

I was lucky. My employer contributed $0.75 on the dollar up to 8% of my pay, so I was saving at a 14% rate. It was a fantastic deal that allowed me to retire at 60.

[devenchyk]

At 27, my savings/investing rate is roughly 50% going into 2025. I make about $3300 a month after tax, & mortgage & bills are about $1600 per month, & the rest is invested & saved. Im a single man with no dependents, so I plan on getting a second job or gig work next year & all those earnings will be saved to get an income property in the future.

[tbrayden]

I’m a GenXer. Didn’t start 401k until age 36. 18 years later, I’m now at $1M. For a while, was just doing enough to get the match, but the past 10 years or so I’ve been maxing out pre tax. Now starting to put money in a taxable account, since it’s a better return than most other things.

[davidbernalpianista]

Great information Erin! My employer offers dollar per dollar up to 6%, so it results in 12%

[kingyos]

You're absolutely amazing. I actually understand finance. NOTE: I just recommended your channel to all my colleagues at work (500+ employees). Continue the great work!! Best of luck!!

[lancenickles]

I agree that 6% (or full match) is not enough. I believe that extra investments should go in Roth and brokerage accounts though. You want pre-tax $ coming out at lower tax rates later in life. That's hard to do with large balance (large distributions) given that it also causes social security $ to be taxed more.

[pamrochon]

I put 6% (match of 3%) into my 401k, just opened a 401k Roth account and deposit 3% into that, I put 3% into my pension fund (employer has ended this for new employees as of 10 years ago, but they are putting about 22% into the pension on my behalf), so I save 12% from my pay, and my employer is putting 25%, so 37% overall savings rate. I have about 10 years left until I retire. I can last for another 10 years.

[Sondan]

We are financial mutants and save between 40-50%, have zero bills, own our house, and watch a lot of Erin videos. <3
(On a lighter note Erin, that color really POPS on you and your hair looks fantastic !)

[stevejones]

I started only saving the matching rate my employer gave in my last and current company. Around 15 years ago I changed that mindset and increased it to what it is now at 15%.

[kevincross]

I think this is a wonderful idea for employers to do for their employees. I have spoken with several of my younger colleagues through the years at my place of work. Several indicated they don't know how they can put away any money to match because of their tight finances. I encouraged them to start with at least $10 per paycheck.