Here’s How Much Money You Should Have Saved by Every Age
Updated: Feb. 07, 2023You know the importance of stowing away money for your various life stages, but how much is enough? Here, financial experts recommend goals for every age.
Age 25: $16,000 to $20,000
By the time you’ve hit your quarter-life, chances are you’re probably just starting your career or perhaps, still in graduate school. At this age, it’s most important to establish a “savings habit,” that will define your money rituals moving forward, says Kimberly Foss, CFP, CPWA. founder and president of Empyrion Wealth Management. Even if you’re only able to afford $10 to $20 a month in your savings, begin disciplining yourself to pay yourself first and foremost. This is also the very best time to begin contributing to your employer’s retirement plan. “Money that you can put to work now on a tax-free basis has decades of compounding effect going for it,” she shares. Including your contributions to your 401K and other savings accounts, Foss ays most people around this age should aim to have between $16,000 and $20,000 in savings.
Age 30: Three to six months’ worth of expenses, plus one year’s salary
Whether you are 30, flirty and thriving, or getting hitched and starting a family, you should have two things by the time you blow out 30 birthday candles: three to six months’ worth of expenses in an emergency fund and one year’s salary in retirement savings, explains Emily Guy Birken, author of End Financial Stress Now. Your emergency fund should be in cash in an account that you can access in the event you lose your job or need to take an unexpected leave of absence. Having these dollars are your disposal allows you to make smart choices for your career, as well as rest easy if your washer-and-dryer decides to bite the dust.
Since you still have at least another 35 years of work ahead of you, your retirement account should still be getting plenty of attention. “Aim to have one year’s worth of your salary set aside in your 401(k) or IRA by the time you hit your 30th birthday—this will give you decades of compound interest,” Birken explains.
At the very least, you should be meeting the minimum contribution to receive your employer’s full match. For example, if your employer kicks in an additional 3 percent when you contribute 6 percent of your salary to your 401(k), you’ll be making the total contribution 9 percent. To get here, start by setting up the largest contribution you can afford, and then set up a 1 percent contribution increase for 3 months in the future, and another 3 months after that, and so on. “By bumping up your contributions 1 percent at a time every three months, you can slowly increase your contribution without feeling the pinch all at once,” she notes.
Age 35: $45,000 in savings
From having children and buying a home to starting college funds and potentially moving and shifting careers, there are many moving parts to balance in your mid-30s. Even so, Foss stresses the value of keeping a careful watch on your savings and making smart choices. She estimates most 35-year-olds should try to have $45,000 in savings. “Certainly, the expense of raising a family can take unexpected bites from your resources, but your earning power is increasing, too,” she explains.
If you aren’t already contributing the maximum to your 401K, IRA or another tax-favored plan, it’s time to make the switch, as your retirement years are only getting closer and closer. “You should avoid extreme conservatism in your investment choices; with the number of years until your retirement, inflation is your worst enemy,” Foss says. “Consider investments with a proven track record of outperforming inflation,” she adds.
Age 40: Two years’ salary in retirement savings
Those babies you had are turning into toddlers, kids, or teens. You’re comfortable paying your mortgage, and perhaps, considering if you’d like a vacation home. You’ve likely been married for a while now, and life, seemingly, is going somewhat swimmingly. Birken suggests marking the end of your 30s by hitting an important goal: in addition to your emergency fund of three to six months living expenses, aim to have two years’ salary in retirement savings…with 25 years to go until retirement, you’re on your way.
“If you were able to get one year’s salary saved by age 30, then you will only need to save about 5 percent a year to get double that amount by age 40—but it’s a great idea to save more than 5 percent each year if you’re in that enviable position,” Birken continues. “If you only managed to save about half your goal by age 30, then you’ll need to save 10 percent per year to hit the mark by age 40. If you’re starting from $0 at age 30, you’ll need to set aside nearly 20 percent per year to have two years’ salary saved at age 40.” Check out these easy ways to save money without feeling the pinch.
Age 45: $175,000 in savings
Though it seems like a handsome figure, it’s definitely not enough if you intend to golf and vacation in your 60s and 70s. Foss says you’re reaching the top part of your curve, career-wise at this age, and you may be funding a 529-plan to allow tax-free accumulation of funds for the education of your children, as well as tax-free withdrawals for qualified educational expenses. It’s smart—and a great step to take. “The other smart move is to continue maxing out your 401K, IRA, and other tax-qualified plans. Though you are closer to retirement now, you still have a significant number of years to let compounding work for you,” she explains. At your fingertips, you should have between $150 and $175K in savings, plus nest eggs and emergency funds.
Age 50: Four years’ salary in retirement savings
Consider this scenario crafted by Birken: You’re a 49-year-old who has an annual salary of $68,000. You’ve saved $272K by the time your half-century birthday rolls around, and you see an 8 percent annual interest on your investments. This would create a robust nest egg of more than $862,000 by the time you retire, even if you didn’t add another penny before turning 65.
“If you have been saving all along, hitting the four years’ salary saved for retirement benchmark will be easier, since the compounding interest on the money you contributed in your 20s and 30s means you have to set less aside as you get older,” she continues. And the good news, if you have two years’ salary saved as of age 40, you will need to save less than 10 percent per year to reach this goal. If you have one year’s salary saved by age 40, you will need to set aside 20 percent per year to reach this goal. Read on for 17 money-saving habits from super savers.
Age 55: $300,000
Though you still have a decade left of work, Foss says, you’re likely entering the empty nest years, which could save you plenty of money. “It may be time to consider downsizing and re-investing some of the proceeds of your real estate holdings into other asset types,” she explains. “You should also continue to make the maximum allowable contribution to your tax-qualified plans, both privately owned and through your employer; especially now that you are at the top of your earnings scale, these contributions will form a significant part of your retirement nest egg.” Around this age, it’s best to have five times your salary stowed away, with a goal of $300,000.
Age 60: Diversify your retirement savings
As you inch your way closer and closer, now is the time to be intentional about diversifying your retirement savings. “What is most important is to remember that you do not stop investing when you retire. You will still want to keep some of your money in long-term investments—like stocks—so it can continue to grow for you even after you have stopped putting money aside,” Birken explains.
And if you’ve been aggressive with your investments before, now is the time to begin moving some funds—one to three years’ worth of retirement expenses—to more stable investments, like bonds and CDs, to ensure you don’t lose the cash you’ve worked so diligently to save. “This money will be there for you when you retire, even if the market has a downturn at just the wrong time,” Birken adds. She also recommends having some of your retirement in mid-term investments so it can grow during the next handful of years, as well as some money stored in long-term investments. This gives it the time to ride out market fluctuations and continue to harness the power of compound interest that a long timeline offers to investors. “You won’t be touching this money until you’ve been retired at least 15 or more years, so you still have the time horizon to let this money grow,” she adds.
Age 65+: Maintain a plan for your savings
Congrats, you did it! No more clocking in every single day, and the freedom to sleep in as late you’d like, travel where you can afford, and savor your success. You’re Not completely off the hook though, since Birken says part of your job as a retiree is to rebalance your investments every year. “At the most basic level, this means moving some money from your short-term investments to your spending/checking accounts each year so you have spending money. But it also means making sure you are keeping an appropriate amount of money set aside in each of your investment levels: short-term (stable investments), mid-term (slightly riskier with somewhat higher returns), and long-term (higher returns over longer timelines to balance out risks),” she explains. Read on for 13 retirement mistakes you need to take seriously.