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Holly's salary is $80,000 per year. She contributes 10% of her salary to her 401(k) plan. Her employer contributes 5% of her salary to a profit share plan. She also contributes $2,500 per year to an IRA. Holly's savings ratio is

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Based on the amount that Holly contributes per year, her savings ratio can be said to be 18.1%.

Savings Ratio

  • Percentage of annual salary that is contributed to retirement funds.
  • Includes savings made by employer.

Holly's savings are:

= (10% + 5%) of salary + Contribution to IRA

= (15% X 80,000) + 2,500

= $14,500

Savings ratio is:

= Savings / Annual salary

= 14,500 / 80,000

= 18.1%

In conclusion, savings ratio is 18.1%.

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