The younger we are, the less we think about things that will impact our future. Savings are a prime example, as most of us don’t really feel concerned about how much money we have saved until we’re older and closer to retirement. The fact is that we should be thinking about savings at every age. You’re never too young to be focused on savings goals.
If you’ve ever wondered how much money you should have saved at your current age or in comparison to others your age, this article should provide some guidance. We’ll provide guidance on how much money you should have saved at every age.
The Importance of Saving
As far as I know, cash is still king. With it, you’re able to accomplish your life’s goals; without it, you won’t accomplish much. And with inflation rising by the minute, the less cash you have — the less you’re able to do in life. At the end of the day, money ensures that we’re prepared for our life’s goals and future and for unexpected things, like emergencies. While money isn’t everything, having what you need to handle all of this makes life a lot easier to walk through, which in turn releases a lot of stress from your life.
How Much To Have Saved at Every Age
Many financial experts will tell you that at retirement age (67), you should have 10 times your income saved up. So, depending on if you plan to retire before or after 67 will determine how much you should compensate for that. For instance, if you plan to retire at 62, you will need to have more than 10 times saved because you will need your money to last longer. Likewise, if you plan to retire at 70, you may not need 10 times your income.
While this may seem like a lot to have at retirement, it’s impossible to accomplish without starting at an earlier age that will allow you to get there over time. Over time are the keywords here. It’s important to set important savings milestones along the way. So, we’ll start at 30 and work our way back up to see how we get to our ultimate retirement savings goal. These savings goals include retirement and investment accounts and transactional or personal savings accounts (checkings, savings, money market).
By the age of 30: Have the equivalent of your annual salary saved up. If you make $25,000 a year, you should have $25,000 saved up.
By the age of 40: Have three times your annual salary saved up. If you make $25,000 a year, you should have $75,000 saved up.
By the age of 50: Have six times your annual salary saved up. If you make $25,000 a year, you should have $150,000 saved up.
By the age of 60: Have eight times your annual salary saved up. If you make $25,000 a year, you should have $200,000 saved up.
By the age of 67: Have ten times your annual salary saved up. If you make $25,000 a year, you should have $250,000 saved up.
Average savings for most Americans ages 35 to 75 is anywhere from $27,000 to just over $55,000 (not including retirement accounts). Where do you factor into the mix of savings?
How To Start Saving
It’s not easy for everyone to save. For some, their savings goals seem out of reach; they’ve gotten behind and feel they can’t catch up. It’s okay. Regardless of how or what age you start, it’s just important to start.
Some suggestions for starting are putting away 10% to 15% of your income each year. Then, invest half of your savings in stocks to get a high return on your money. Other suggestions include putting $20 a week in a high-yield savings account. Doing that could save you over $1,000 a year.
Here are some more savings prompts at every age:
At age 25:
- Start building your emergency fund (3 to 6 months of expenses)
- Start saving for retirement through your employer’s 401(k) or an IRA account (about 15% of income)
- Start a plan for paying off your debt
- Start putting your life goals in place. Do you plan to own a home or rent? What other financial goals moving forward? At what age do you want to retire?
At age 30:
- Try to have a year’s salary saved up or plan to by age 35.
- Avoid lifestyle creep. Put a budget in place and avoid impulse buying.
- Increase the amount in your emergency fund if you can.
- Diversify your investment accounts.
At age 40:
- Make a plan to be debt-free.
- Get a financial planner to keep you on track.
- Increase your contributions to your retirement account(s).
- Reassess your goals.
At age 50:
- You may be making more money, but try to cut back on your spending.
- Try to max out your retirement contributions.
- Make a plan to pay off your mortgage. Try to be debt-free.
- Start ironing out what retirement for you will look like and stick to the retirement plan.
At age 60:
- Try to cut costs wherever possible to lower your cost of living.
- Use senior discounts whenever you can.
- Try to avoid having to collect social security benefits at age 62. The longer you wait, the larger your benefits.
Tips for Saving at Any Age
Now that you understand the importance of saving and how you should be progressing with age, saving can be simple if you remember the general steps below:
- Start a budget and stick to it
- Save, save, save
- Start an emergency savings fund
- Pay down your credit card debt
- Diversify your savings accounts
- Get a financial advisor
- Keep a good credit score
The Bottom Line
You may not put a lot of stock into the importance of savings, but having access to cash when needed is extremely important in life. Having it in retirement is even more important, especially if you’re not physically able to keep working at the rate you once were.
Start saving today. It’s never too late. Start a plan, regardless of your age, and don’t worry about how behind you are. Make a plan and stick to it. Do your best with what you have and catch up when you can.
- How Many Savings Accounts Do You Really Need?
- IRS Releases New Tax Brackets For 2024: Here’s What To Expect