Here's How Much You Should Have Saved at Every Age
by Lyle Daly | Updated July 17, 2021 - First published on April 15, 2019
We've crunched the numbers to show you what your savings targets should be.
It's common knowledge that you should save money consistently, but the tricky part is knowing exactly how much you need. That can lead to anxiety as you wonder whether your savings stacks up to your peers', especially if you've read about those "super-savers" who are well ahead of the curve.
To help you figure out where you're at savings-wise, here are the saving targets you should aim for by age.
How much to have saved at every age
Before we get to the savings targets, there are a couple things to note. First, each age includes a target range to aim for instead of one set amount. Everyone's circumstances are different, so these ranges offer flexibility for those who didn't start saving as soon as others.
Second, these targets are not specific dollar amounts but rather percentages of your salary. This puts everyone on a level playing field regardless of how much they make, as the savings targets won't be impossible to reach for those with lower incomes.
In this case, "savings" refers to money in banking, investment, and retirement accounts. We're not talking about net worth, so you don't need to subtract your debt or add the value of assets, such as homes or vehicles.
- 25: 10% to 50% of your salary
Your twenties are the perfect time to start saving, but of course, plenty of us either put it off or simply didn't have the means to do that when we're just getting our careers started. If you're on an entry-level salary or if you spend most of this decade in school, it can be tough to save.
Still, you should aim to build an emergency fund in an easy-to-access bank account. You should also strive to start investing for retirement; starting early will likely pay off far more than you imagine.
- 30: 50% to 100% of your salary
- 35: 100% to 200% of your salary
A popular suggestion is that you should have your full annual salary saved by the time you hit 30. That's a smart goal, but it may not be realistic for those who only got serious about saving in their late twenties.
Regardless, by your late twenties and your thirties, you should be putting money away for retirement. As your income grows, set your savings targets higher and put more money away every month. For example, if your income increases by $500 per month, try to put as much of that into your savings as possible instead of spending more.
That will accelerate the growth of your nest egg and give you more opportunity to benefit from compound interest -- the seemingly magical force that leads your investments to grow exponentially.
- 40: 200% to 300% of your salary
- 45: 300% to 400% of your salary
By now, you're likely at or near your peak salary, giving you the opportunity to increase your savings contributions. Since you should have an emergency fund at this point, you can focus more on investment and retirement accounts with greater growth potential.
- 50: 400% to 600% of your salary
- 55: 600% to 800% of your salary
The numbers jump significantly here, and the primary reason for that is because of compounding. If you've been diligent about your savings up to this point, then you'll reap the rewards here and see your money start to grow much more quickly than before.
- 60: 800% to 1,000% of your salary
- 65: 1,000% to 1,500% of your salary
Once you reach age 60, you can withdraw from tax-advantaged retirement accounts without facing any penalties, and you'll be close to the age when you can get retirement benefits, such as Social Security.
The goal here is to be able to retire comfortably between the ages of 65 and 70. Here's why at least 1,000% of your salary is a good target for retirement:
- Experts advise that you'll need about 70% to 80% of your pre-retirement income to maintain the same standard of living in retirement.
- 4% of your savings is generally considered a safe withdrawal rate, as you likely won't withdraw more than what you gain through interest and dividends. With savings equal to 1,000% of your salary, you could safely withdraw 40% of your pre-retirement income per year.
- Social Security replaces about 40% of your pre-retirement income.
So if you save that much, you'll get about 40% of your pre-retirement income from your savings and another 40% from your Social Security, for a total of 80%. It's still optimal to save more if you can, but with that much, you can likely make it in retirement without running out of money.
Where should you save your money?
Knowing how much to save is one thing, but it's also important to know where you should keep your money. Here are the types of accounts you should use:
- Banking: Use a reliable checking account for money you spend on your regular bills and a high-interest savings account for your emergency fund. Make sure you research the best bank accounts so you can earn some interest and minimize fees.
- Retirement: You should contribute as much as possible to retirement accounts, because they offer high growth potential and major tax breaks. Employer-sponsored plans, such as 401(k)s, are generally worth maxing out. You can also open your own individual retirement account (IRA) with one of the top IRA brokers.
- Investment: If you're already maxing out your retirement account contributions or you'd like more control over how your money is invested, you can look into the best brokers and start an investment account.
Making sure your savings are on track
Not everyone hits the savings targets above. In fact, most people are far behind on how much money they've saved, so don't beat yourself up if you're in that group.
What's important is setting smart goals for yourself and calculating what it will take to get there. For example, if you're 30 with nothing saved, you could still get yourself back on track at 35 by saving 20% of your salary. It's all a matter of making saving a priority and committing to it for the long haul.
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