How Much Money Should I Have Saved by 30 (and 40 and 50)?

How Much Money Should I Have Saved by 30 (and 40 and 50)?

As the American workforce ages, it's common to think about how much money you've set aside for retirement. You may also wonder if you've saved enough to leave the workforce, much less retire comfortably.

The money you have in retirement savings isn't necessarily what's sitting in a checking or savings account. It's also a combination of cash invested in retirement accounts like a Roth IRA, a 401(k) with employer matching, and personal investments in mutual funds, bonds, and annuities.

The conventional wisdom is the earlier you start saving for your golden years, the better. However, it's never too early or late to begin retirement planning. You may ask yourself, “How much money should I have saved by 30, and 40, and 50?” The answer varies according to how much you earn each year.

How Much Money Should I Have Saved by 30?

When you're in your 20s, you establish yourself in a career. Saving for retirement isn't the highest priority, especially if you're in an entry-level position with a low salary. It's hard to save for something 40+ years in the future when you're just barely making ends meet.

If you're fortunate enough to make a good salary at this age, it puts you in a better position to begin saving for retirement. In this case, Fidelity Investments recommends that by age 30, you should save up at least one time of your annual salary. For example, if you make $45,000 a year, you should set aside at least $45,000 for retirement.

How Much Money Should I Have Saved by 40?

If you entered the workforce in your 20s or younger, you'll be well-established in your career by the time they reach their 30s. This age demographic typically has middle to higher incomes but has other financial obligations to pay, like student loans, mortgages, and car loans.

Despite these commitments, you're better poised to contribute towards your retirement fund at this age. By the time you reach 40, you should have at least three times your yearly salary saved up for retirement, according to Fidelity Investments. For example, if you have an annual salary of $60,000, your retirement investments should be worth at least $180,000.

How Much Money Should I Have Saved by 50?

Once you've reached your 40s, thoughts of retirement start to creep in a bit. You're not at the age of preparing to leave the workforce, but it's getting closer to reality than it was in your 20s and 30s. By the time you reach your 50th birthday, Fidelity Investments advises you to have at least six times your salary in savings.

If your salary is $73,000 a year, your retirement savings should be approximately $438,000. You're not alone if your retirement account isn't anywhere in this stratosphere. Only 35% of people between 50 and 54 saved more than $100,000 for retirement.

It's Not Too Late to Save

No matter which age bracket you fall in, you may wonder how much money you should have saved by 30, 40, and 50. You can still set aside money for your retirement, but it's important to have an honest assessment of your finances. Consider hiring a financial advisor to assist you in establishing a plan at any age.

How to Save For Retirement By Age 30

If you're in your 20s, you may have a limited amount of money to set aside for the future, and that's okay. You don't need thousands of dollars in disposable income to start saving for retirement. You can take steps in your 20s to save a decent amount of money by the time you reach your 30th birthday.

Open A Roth Individual Retirement Account (IRA)

A Roth IRA is one of the more common types of retirement savings accounts. You pay taxes on any funds you deposit into the Roth IRA, but there's no tax on the money when you withdraw from it during retirement. Until you turn 50, the most you can contribute to a Roth IRA starting in 2024 is $7,000, provided you meet the account's income guidelines.

Contribute To Your Employer's 401(k) Plan

Many companies offer 401(k) retirement plans in which they will match a certain percentage of your contributions into the account. Contribute the minimum amount required for full 401(k) matching funds eligibility. When you can comfortably afford to, increase the amount of money you contribute to your 401(k).

Set Up An Emergency Savings Account

Putting money aside for an emergency savings fund sounds like a pipe dream when you don't have a dime to spare, but that's all the more reason why you need one, especially in your 30s. You should have at least three to six months of income saved up to cover your everyday living expenses in the event of an emergency like a debilitating illness or injury, or a job loss.

Pay Off High-Interest Debts

Take an assessment of your finances, noting any outstanding debts that you owe. Pay off the debts with the highest percentage rates first, including store and major credit cards, private student loans, and car loans. Continue making regular payments on your low-interest debt obligations. Once you've paid off the higher-interest debts, use those extra funds to pay off any low-interest debts and set aside money to save or invest in a retirement account.

Earn More, Save More

When you approach age 30, hopefully, your income will also rise. If you earn more, increase the amount set aside in savings, whether invested in a Roth IRA, 401(k), or towards your emergency savings fund. Spending the extra money is tempting, but putting it to work in a savings or retirement account will benefit you in the long term.

How to Save For Retirement By Age 40

If you have little to no retirement savings in your 20s, try to catch up in your 30s. Your annual income is probably higher, although you likely have more financial obligations than you did in your 20s. Besides the previously mentioned steps on saving for retirement in your 20s, there are other measures to take in your 30s to prepare for your exit from the workforce in later years.

Set Realistic Retirement Goals

Don't worry if you need to make up for lost time in the savings game, but you must set realistic goals. Unless you come into a substantial financial windfall that ultimately makes up for the years you missed, you should expect to keep working throughout your 50s and potentially in your 60s, depending on your economic needs. You still have time to catch up, but it will take dedication to meet your retirement goals.

Prioritize Your Retirement Savings

If you're catching up on retirement savings, it's important to prioritize that, even if it means you cannot provide financial help to loved ones or only offer limited help. This includes tuition assistance for your kids when they start college. Students have more ways to pay for post-secondary education than retirees have to pay for living expenses.

Increase Your Income

Increasing your income is one way to help you catch up on retirement savings in your 30s. Research the salary range for your occupation using sites like the U.S. Bureau of Labor Statistics and Salary Expert. If your salary falls on the lower end of the range, you can leverage that to negotiate a pay raise or find a higher-paying position elsewhere.

If neither option works, consider getting a part-time job. A lot of side hustle opportunities will fit into your lifestyle and schedule. You can save or invest the money earned from a side gig. Over time, you'll have built up a nice nest egg.

How to Save For Retirement By Age 50

While having a fully funded retirement plan in place is optimal by the time you reach your 40s, that's not always possible for everyone. However, there's still time to build up your savings before you turn 50 if you make saving for retirement a priority.

Stay In the Workforce Longer

If you're just starting to save for your retirement in earnest while in your 40s, you probably won't retire in your 50s. You may even have to work well into your 60s before you have enough money to live on when you're no longer working.

Decrease Your Expenses

Reducing or eliminating unnecessary costs is an efficient way of finding money to set aside for retirement. Analyze your monthly budget and identify expenses you can forego. Do you have a lot of paid subscriptions for streaming services? Switch to cheaper or free monthly plans. How often do you dine out or have food delivered? Prepare food at home more often. This involves some sacrifice, but it will pay off when you're ready to leave the workforce.

You Can Do This

Wondering how much money you should have saved by 30, 40, and 50 is a common concern. Still, it's an issue you can adequately address at any age. Setting realistic goals, having a savings plan in place, and sticking to that strategy can help you meet your financial objectives for retirement. Any short-term sacrifices you make in the present will be worth it in the future.