How Much Should You Have in Savings by Age?
Few people are comfortable with the amount of money in their savings account these days. Some quick research shows that the majority of Americans have less than $1,000 available for emergencies. As if that isn’t alarming enough, consider that fewer working adults are saving for retirement.
It adds up to a potential financial crisis for individuals and families across the country. The good news, though, is that you don’t have to continue worrying about what little money might be in a savings or retirement account. The sooner you recognize the need to increase your savings, the better off you’ll be in the long run.
So what are the ideal “savings” targets and how you can put yourself in the best position to reach them? The first step is knowing the recommended savings by age.
Create an emergency fund first
It’s easy to get carried away with retirement contributions at a young age. Frankly, the best money move you can make early in your career is establishing an emergency fund. You just never know when you’ll have to come up with the money to pay for car repairs or a medical bill.
Now for the follow-up question: how much do you need in an emergency fund? The answer ultimately depends on your situation. If you and your spouse have relatively stable jobs, a three-month buffer might be sufficient for the time being.
It’s a different story if you’re living alone or either you or your spouse have a more sporadic pay schedule. In either of these situations, your emergency fund should cover six months’ worth of expenses. You may want even greater peace of mind and aim for a savings range that keeps you financially stable for a year or longer.
How much to save in your 20s
This is where young people can really grow their savings accounts. Mid- to high-level earners have the flexibility to put more toward an employer-sponsored retirement plan and any individual retirement accounts. Making saving a priority at a young age allows you to take full advantage of compound interest, which will certainly be your best friend come retirement time.
There are a few reasons why folks in this age group struggle to save. For one thing, student loan debt continues to climb. These debt payments, along with credit card payments, tend to prevent people in their 20s from boosting their savings accounts.
How much to save in your 30s
Alright, now we can get into some actual figures. A number of financial experts suggest having one times your salary saved by 35. This means that if you make $60,000 a year at age 35, you should have that same amount saved in retirement. In terms of an emergency savings balance, opt for between $20,000-$25,000 if possible.
Don’t beat yourself up if this goal doesn’t seem realistic. Many workers at this age must find a way to juggle the costs of child care and living expenses. Of course, student loans and credit card debt could still be on your plate at this time.
Find opportunities to save even more by creating a monthly budget!
How much to save in your 40s
It’s during this decade that you’ll want two to three times your salary in savings. With several forms of debt hopefully paid off, you should be able to take a more aggressive approach to saving. Raises and promotions may also allow you to catch up with your savings plan.
How much to save in your 50s
Your golden years don’t seem very far off at 50. Even if you like your job and could see yourself working another 15-20 years, assess your finances. You’ll want seven times your salary socked away in savings.
Something else to keep in mind is that these are likely your peak earning years. Double-check that you’re maximizing your retirement contributions, whether it’s at work or through an individual account. The last thing you want to do is leave free money on the table.
How much to save in your 60s
According to Forbes, you’ll want eight times your salary saved by 60 and 10 times your salary saved by 70. There’s a good chance you’ll still be in your highest earning years at this time, so put away extra funds as much as possible. Be sure to ask your financial advisor about catch-up strategies as well.
Don’t forget your homeownership goals
There are a lot of ways to grow financially. And while increasing your savings throughout your career is a good place to start, it shouldn’t be your only wealth-building tactic. With home prices continuing to rise, there’s never been a better time to buy a home.
Take the first step toward a brighter financial future. Call American Financing at (800) 910-4055.