How Much Should You Have Saved at Every Age? Here's the Honest Breakdown
The amount of money you need to survive depends heavily on your lifestyle. Someone who lives in a three-story home will need more in the bank than someone who is content with a studio apartment. However, there is a simple formula you can use to determine how much you should have saved at each age.
A Fidelity research-based blog post encourages people to think of saving as a function of their salary. In regard to retirement savings, someone who is 30 years old should have at least their annual salary saved up, while anyone who is 67 years or older should have saved at least 10 times their salary.
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This research helps people create customized savings goals that align with their salaries. That makes a lot of sense since you are already managing your expenses with your salary. These goals are challenging but not stacked against you and the savings targets vary considerably between 30 and 67. Find out below how much you should have saved at various ages as you move closer to retirement.
How Much Should You Save Before 40?
The research paper suggested saving at least three times your salary before you turn 40. That means if you earn $100,000 per year, you should have saved at least $300,000 by then. You can also look at your average salary over the past five years when calculating this number. For instance, if you have been earning $80,000 per year throughout your 30s but then started to earn $150,000 at 39, it would be difficult to adjust from a $240,000 target to a $450,000 target within one year before you turn 40.
However, going from saving your annual salary at 30 to three times your annual salary at 40 is a bit of a leap. That’s why you should also aim to save at least two times your annual salary by the time you turn 35. It serves as a good checkpoint between your savings goals at 30 and 40.
How Much Should You Save Before 50?
The target savings number goes up to six times your annual salary when you are 50. Someone who earns $100,000 per year should have saved $600,000 at this point. Saving four times your annual income at 45 is a good checkpoint between 40 and 50.
At this stage, investments are doing the heavy work. It’s still important to do the basics of personal finance. Look for ways to earn more money, cut costs and continue to put money into productive assets. However, this is the time when investments have more momentum and influence your ability to reach this goal.
Assuming an annualized 8% return, your money should at least double every 10 years. Investors can also arrive at that conclusion with the Rule of 72. Divide 72 by the annualized return to determine how long it will take for your money to double. An 8% annualized return results in your money doubling in nine years, while it only takes six years to double your money if you manage to get a 12% annualized return.
How Much Should You Save Before 60?
The research paper suggests saving eight times your annual salary before you turn 60, with six times your salary by 55 as a good checkpoint. Investments alone may be enough to get from 8x your salary in 60 to 10x your salary by the time you turn 67, but it’s still good to keep up with productive money habits.
You may have to pick up a side hustle, look for a higher-paying job and cut expenses meaningfully if you are older and behind on these goals. There’s still time to catch up. You also have the option to downsize in the future, which makes more sense as you get older. For instance, most older couples can get by with one car instead of two once they become empty nesters and a smaller house may be the right move.
Regardless of where you are in your financial journey, you have plenty of options. Each action you take can move you closer to these benchmarks. If you are on pace with these milestones, keep up the good work, but it serves as a productive wake-up call for people who need to catch up.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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