Saving money. Hearing those words can evoke a range of emotions.
Maybe it gives you the same feelings you had when your parents told you to do something you didn’t want to do. Maybe you get frustrated at how challenging it can be. You may be confused by the endless advice on how to save and how much. You can feel guilty or anxious about not saving enough.
Saving money is a lifelong journey. Like most lengthy endeavors, your financial journey has a number of milestones you are supposed to reach to know you’re on track.
For example, if you’re running a marathon, you probably have a per-mile pace to ensure you don’t run out of gas with miles to go. People writing books often have a daily or weekly word count to help them finish on deadline.
Financial experts like to use milestone birthdays to help you determine whether your savings are on track. The following are some of the popular guidelines for how much money you should have saved at certain ages.
The most cited advice for saving milestones comes from Fidelity Investments. They recommend you save an amount equal to a year’s salary by age 30. That means if you earn $50,000 by the time you turn 30, you should have $50,000 accumulated in savings.
There are several challenges to reaching this goal. First, those who attended college before joining the workforce likely had student loans to pay during their 20s.
It also requires you to put aside a significant portion of your salary in those early years.
Say you started a career after college at the age of 22. If you earned a 4 percent pay increase each year until 30, here is what you would have earned each year:
- 22: $36,000
- 23: $37,600
- 24: $39,150
- 25: $40,800
- 26: $42,470
- 27: $44,250
- 28: $46,000
- 29: $48,000
To reach $50,000 in retirement savings by age 30, you would need an average of $6,250 added to your savings each year. That’s 17 percent of your first-year salary in this hypothetical scenario.
It’s not just retirement you need to save for. Experts advise you also have an emergency savings fund to handle unforeseen events like medical expenses, periods of unemployment, or large repair bills.
Ally Financial Inc., a digital financial services company, suggests your "ideal savings balance" be between $14,115 and $28,230 by age 30. The bank says its wide range is based on your savings needs will vary based upon your monthly expenses.
So if you’re adequately saving for retirement and emergencies, you would need between $64,000 and $78,000 in savings by the time you reach age 30.
That’s a large number. But it may be doable if:
- You minimize your debt and expenses so that you have extra money at the end of each pay period; and/or
- You increase the amount you save as you earn more money; and/or
- The funds you invest in generate healthy returns during this period; and/or
- You work for a company that offers matching funds to your 401(k), meaning you don’t have to save the full amount yourself.
Fidelity recommends savings equal to three times your annual income to be on track for retirement. That means if you earn $70,000 by this age, your retirement savings should equal around $210,000.
Ally also suggests you have three times your current income saved for retirement by age 40. In addition, your emergency fund should tally between $17,799 and $35,599.
Fidelity recommends a person saving for retirement should have six times their annual income by the time they reach age 50. That means if you make $85,000 a year at this age, your retirement account should hold about $510,000.
Ally says five times your income is sufficient for retirement, but that you should also have $18,846 to $37,693 in an emergency fund.
By age 60, you’re either considering retirement or perhaps just a few years away. Fidelity says at this age, you should have eight times your annual income saved for retirement. If you’re a 60-year-old earning $100,000, that means you need $800,000 to be on track for retirement.
If you then retire at age 67, you should have saved 10 times the income you earned in your last year of full-time work, according to Fidelity.
Ally pegs your retirement savings needs at seven times your income at age 60. Since you may have fewer expenses at this point, your emergency fund can be between $16,554 and $33,108.
By age 70, Ally suggests your emergency fund be between $14,067 and $28,134. Your retirement account should be nine times your final income.
Keep in mind these are guidelines to help you with your savings goals. The most important lesson is that you should save as much as you can. Start on the first day you begin your career.
If you're already in your 30s and you haven’t started yet, don’t wait another day. Every little bit helps. Prioritize saving over nonessential expenses. Think about your future needs as much, if not more so, than your present wants.
If you’re not hitting these milestones, there are ways to catch up, including:
- Earning extra money through a side hustle and using all or part of it to boost your savings.
- Consolidating your debt to lower your monthly debt payments and putting the extra money into savings.
- Securing your income with disability insurance, which is designed to replace your regular income in the event you can’t work because of an injury or illness.
- Taking advantage of the IRS provision that allows you to invest a higher maximum in a 401(k) or IRA once you reach age 50.
The more you dedicate yourself to saving money, the more it can create feelings of contentment, instead of anxiety.
Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.
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