Splitting Things Up

Jeff has to contribute money to his penison plan, but isn't sure how that factors into Baby Step 4.

QUESTION: Jeff asks how he can split up his saving percentages when he gets to Baby Step 4. How does he factor his pension plan into the Baby Step? After hearing his situation, Dave thinks he has a little wiggle room.

ANSWER: In that case, you can reduce the 15% somewhat. I hesitate to depend exclusively on pension plans because they have been known to go belly up. I want you to have funds that you count on, but you could certainly do less than 15% if you are already doing a mandatory 8%. You could do more than 7%, because I’d love for you to fully fund your Roth IRA. Maybe you could push the total above 15%, including the 8%.