When it comes to preparing for retirement, setting up a savings plan early on can help you make progress towards your future goals. But you might wonder, how much should I be saving as I get older?
According to Fidelity Investments, a leader in retirement planning, your aim should be to save about ten times your yearly income by the time you're 67. This total combines your retirement accounts, regular savings, and other investments.
Here's a guide to how your savings should grow with every decade:
In Your 20s: Start Small
- By the time you hit 30: Save an amount equal to your annual salary.
Starting to save right in your 20s is key, even if it's just a little bit. The average savings for people between 25 to 29 is a little over $7,000.
Saving regularly, even small amounts, can hugely benefit you later due to the magic of compound interest. Experts suggest saving 15% of your income each year, starting at age 25, which includes any matches from your employer's 401(k) plan.
In Your 30s: Pick Up the Pace
- By age 40: Have three times your yearly earnings saved.
Your 30s may bring higher income but also more expenses like student loans, a mortgage, or children. The usual savings for this age group in the U.S. is between $9,500 and $13,000.
Don’t get overwhelmed; having a clear goal can help you stay on track. Automate your savings and regularly revisit your spending plan to find ways to save more.
In Your 40s: Focus on Retirement
- By 50: Aim to have six times your annual salary saved.
As you enter your 40s, you may make more money, but costs, like sending kids to college or home repairs, can be high. Financial advisors suggest continuing to save, aiming to set aside 20% of your income.
The average U.S. savings for people in their 40s is around $16,000, but it's important to increase this if you can and cut back on any unnecessary spending.
In Your 50s: Push Yourself
- By 60: Your goal should be eight times your yearly earnings.
People in their 50s often have a sum around $16,000 to $17,000 saved, but it’s never too late to start saving if you haven’t begun already.
Besides saving for retirement, many people at this age also focus on final home loan payments or providing for their grown-up children. Try to find a balance and continue contributing to your savings.
In Your 60s: Transition from Saving to Spending
- By age 67: Aim for ten times your annual income in savings.
Many in their 60s are still working, some may have already retired. On average, people around this age have saved about $14,400, which might not paint the full picture, as some retirees have other resources such as pensions or home equity.
If you're still working, keep saving, reduce the risk level in your investments, and keep an emergency fund of three to six months' living expenses.
It's important to remember that life isn't perfect, and neither is the journey of saving money. You may face unexpected financial hurdles, job changes, or life events. However, the sooner you start saving and the more consistent you are, the better prepared you'll be for the future.
Rather than comparing your savings to an ideal number, focus on what steps you can take right now to improve your financial situation.
-
Check out: Stimulus Payment of $725 Starts in Sacramento: Are You Eligible?
