Do I Include 401(k) Contributions When Calculating My Monthly Savings?

The Impact of 401(k) Plans on Retirement Savings

Since their creation in 1978, 401(k) plans have fundamentally reshaped how Americans build wealth for retirement. These employer-sponsored defined-contribution plans let workers defer pre-tax income, often with an employer match layered on top, while benefiting from the long-term power of compounding. Unlike traditional pensions, 401(k)s hand workers direct control over their investments and a direct stake in broader market growth.

According to the Investment Company Institute, Americans held $10.1 trillion in 401(k) plans as of December 31, 2025, part of a broader employer-based defined-contribution pool worth $14.2 trillion. Total US retirement assets reached $49.1 trillion at year-end 2025, up 11.2% for the full year, representing 34% of all household financial assets in the country.

Access to plans has grown steadily, and participation is at record highs. Vanguard’s 25th annual “How America Saves” report, released in June 2026 and covering 2025 plan-year experience, found that the overall participation rate across Vanguard-administered plans climbed to a record 86%, up from 65% a quarter century ago. Automatic enrollment drove much of that gain: 61% of Vanguard plans now use it, and 79% of plans with at least 1,000 participants do so. Auto-escalation, which automatically bumps contribution rates over time, is now active at 71% of Vanguard plans, the highest share on record. In 2025, 45% of participants raised their deferral rates, average account balances rose 13% year over year to a record $167,970, and the median balance climbed 16% to $44,115. A strong stock market contributed meaningfully: the S&P 500 gained 16% in 2025 while the US bond market added 7%, providing a favorable backdrop for workers who stayed invested.

The combined average employee and employer contribution rate hit an all-time high of 12.1% in 2025, with the average employer match reaching a record 4.7% of pay. The ranks of 401(k) millionaires keep growing as well. Fidelity Investments reported a record 769,000 participants in its plans with account balances topping $1 million as of the second quarter of 2026, up 19% from the prior quarter and roughly 30% from a year earlier, with the average 401(k) balance across Fidelity accounts reaching $155,800. Despite the risks of market volatility and annual contribution caps, the 401(k) remains the cornerstone of private-sector retirement planning in the United States.

A Redditor’s Question on Counting 401(k) Savings

A Redditor on the r/personalfinance subreddit sparked a lively discussion by asking whether 401(k) contributions should count when calculating monthly savings. The core question: when someone says “I save $1,000 a month” or aims to “save 15% of income,” does that figure include retirement account contributions?

The poster wondered whether “savings” means all forms of wealth accumulation (including 401(k)s and IRAs) or only after-tax cash set aside for near-term needs. Many savers wrestle with exactly this question, and the answer shapes how accurately they can measure progress toward financial goals.

The case for counting 401(k) contributions as savings is straightforward: those dollars are real money being set aside for the future, growing tax-deferred, and often amplified by an employer match. Excluding them can make a disciplined saver look financially underprepared on paper. The case for separating them is equally practical. Those funds are illiquid, subject to a 10% early withdrawal penalty before age 59.5, and cannot cover an emergency, a down payment, or a career gap. That tension showed up in PSCA survey data revealing that hardship withdrawals rose to 2.7% of participants in 2024, up from 2.1% in 2023. Vanguard’s 2026 report, covering 2025 plan-year data, shows the pressure persisting: 6% of participants initiated a hardship withdrawal in 2025, up from 5% the year before, suggesting many workers tap retirement accounts precisely because their liquid cushion ran out first.

The distinction matters more than it might seem. Someone who channels 15% of income entirely into a 401(k) may be building a robust retirement nest egg while carrying almost no liquid reserve for short-term needs. Tracking both categories separately, rather than blending them into one aggregate savings rate, gives a far clearer and more honest picture of overall financial health.

Actionable Advice for Savers

These are general observations, not professional financial or tax advice. That said, several practical steps can help savers navigate this tension and build a more complete financial picture.

• First, track retirement and liquid savings separately. Aim for a combined savings rate of 15% to 20% of income, but label each bucket clearly. A reasonable split might be 10% directed to a 401(k) and 5% to 10% into a high-yield savings account for emergencies and near-term goals.
• Second, know your 401(k) limits. In 2025, the employee contribution limit was $23,500. Workers aged 50 and older could add a catch-up contribution of $7,500, while those aged 60 to 63 qualified for a higher “super” catch-up of $11,250 under the SECURE 2.0 Act. For 2026, the IRS raised the base limit to $24,500, increased the standard catch-up for those 50 and older to $8,000, and held the super catch-up for ages 60 to 63 at $11,250. One important 2026 rule: workers who earned more than $150,000 in prior-year wages must now make their age-based catch-up contributions on a Roth (after-tax) basis rather than pre-tax.
• Third, capture the full employer match before diverting funds elsewhere. According to PSCA’s 68th Annual Survey covering 2024 plan-year experience, participants contributed an average of 7.7% of pay while employers added 4.8%, for a combined savings rate of 12.5%. Vanguard’s 2025 plan-year data puts the combined rate at a record 12.1%, with the average employer match reaching an all-time high of 4.7%. Either way, the employer contribution is immediate additional compensation that no other savings vehicle can replicate.
• Fourth, review spending monthly. Trimming dining out or unused subscriptions can redirect $100 to $200 toward liquid reserves each month without touching 401(k) contributions.
• Finally, reassess goals at least once a year, ideally with a financial advisor or a budgeting tool such as Empower, YNAB, or Quicken Simplifi. Note that Mint, once a popular option, shut down in March 2024, so savers still relying on it should migrate to a current platform.

By treating retirement and liquid savings as two distinct but equally important categories, rather than collapsing them into a single number, savers can make better-informed decisions about both their long-term security and their day-to-day financial resilience.

Editor’s note: The Fidelity 401(k) millionaire count was updated to the Q2 2026 figure of 769,000 (a record, up 19% from Q1 2026 and roughly 30% year over year), and the average Fidelity 401(k) balance of $155,800 for Q2 2026 was added. The 2026 IRS contribution limits ($24,500 base, $8,000 catch-up for ages 50 and older, $11,250 super catch-up for ages 60 to 63) were confirmed against the IRS announcement.

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