Here’s How Much Money You Should Have Saved at Every Age

Sometimes it can be hard to weigh living in the present against preparing for the future. Maybe you’re in your 20s and you’re thinking, Why would I save all of my money for the future when this is supposed to be the best time of my life? But, then you talk to some of your friends and they tell you about how much they’ve saved for retirement already. 

It’s hard to know how much money you should be saving and how much you should be using to enjoy yourself. People say over and over, “You need to start saving early!” But no one gives you a road map. 

No one tells you how much you should have saved when you’re 30, when you’re 40, and so on… Well, that’s exactly what I’m here to do today. We’re going to go age by age so that you can make a plan and reach your retirement goals. 

Here’s how much money you should have saved at every age.

The Method

Now, when you’re considering how much money you’ll need to retire, the answer is obviously going to be different for everyone. It depends on your lifestyle, what age you want to retire at, whether you have people that you’re still supporting financially, 

Apparently, 44% of Americans are still paying their mortgage into retirement. Plus, you need to be prepared to spend a lot of money on healthcare once you’re in retirement because a 2022 study from Fidelity showed that you might need as much as $15,000 per year to spend on healthcare alone for you and a partner.

It seems like everything is a bit more expensive these days. Anyway, the point is that you need to come up with your own budget to figure out how much you need to retire, which is different for everyone based on their lifestyle. And then you can work out how much you should have saved by every age from there. 

And, if you need some help with that, there are some great budgeting tools online. For instance, I’m a big fan of the one on Vanguard’s website. However, they forgot to include one essential expense in their budget and that’s an emergency fund, which absolutely everyone should have. But, we’ll cover more on that later. 

The 50/30/20 Rule

Alright, a solid general rule to follow when trying to decide how much money to save every year is called the 50/30/20 rule. It essentially says that you should spend 50% of your after-tax income on your needs (rent, healthcare, food, utilities, etc.), 30% on your wants (leisurely stuff and new toys or whatever), and at least 20% should be going into your savings. 

If you follow that rule all the way from when you start working until you retire, you should definitely have enough funds to retire comfortably.

Let’s take a look at how Ally Bank broke it down for each age group in this chart:

As you can see, the salaries that they used for each age group are the national average in 2022. For instance, they used a yearly salary of $34,680 for people ages 20 to 24 and a yearly salary of $49,920 for people ages 25 to 34, 

So, if we refer back to this Ally Bank chart, we can see that you should be saving around $580 dollars per month from ages 20 to 24 and, from ages 25 to 34, as your pay scale goes up (as most people’s do throughout their lives), you should be saving about $830 per month. 

From 35 to 44, you should be saving around $980 per month. From 45 to 54, you’re looking at $1,000 per month, and so on. If you’re able to meet these goals month after month, then you should have no problem retiring around the age of 65 or 70, like most people do. 

Some great ways to help yourself stick to this savings plan are by using a budgeting app like Mint or YNAB.

Or by using the envelope system, 

Which basically involves taking out your monthly paycheck in cash and placing it into physical envelopes that are labeled with the expenses that you’re going to use them for. 

But, as you’re saving and saving throughout the years, 

It’s definitely going to be helpful to have some benchmarks to hold yourself accountable to. 

So, that’s what we’re going to cover next.

Making Benchmarks

So, you make it your goal to save that 20% every month. But, last month, you had a bunch of unexpected expenses. And, a few months before that, you went on a shopping spree and barely saved any money. Long story short: you’re failing to meet that 20% month after month.

Suddenly, you’re 30 years old and you want to know if you’re still on track for retirement. Well, there’s a general guideline for how much you should have by every age and it’s based on your income. 

Let’s check out another chart from our friends at Ally Bank: 

As you can see, you want to have saved 1 times your income by age 30. So, if you remember that people in the age group of 25 to 34 have an average salary of $49,920. Well, that’s how much the average person should have when they cross that 30-year mark. 

From there, the savings goals get a good deal higher. The idea is that, from 30 to 40, you’re going to be saving a lot more than you were from 20 to 30. You’ll have hopefully paid off your student loans, you’re going to be earning a lot more, and the money you already have saved is going to be growing with compound interest. 

So, by age 40, you want to have about 3 times your salary saved up. For instance, since the average 40-year-old in 2022 was earning $58,600 per year, they should have about $175,800 saved by the time they’re 40 years old. 

By the time you’re 50, you want to have about 5x your salary saved up. So, since the average 50-year-old made about $59,900 in 2022, they should have about $299,500 saved up by the time they cross 50. 

At 60, you want about 7 times your income, which would be about $420,000 on average. At 70, you want about 9 times your income. And, at 80, you want to have 11 times your income. 

The Power of Compound Interest

Alright, so before you completely give up and decide that you’re never going to retire, let’s take a look at how it’s actually not that hard to reach these savings goals when you factor in compound interest and you consistently save. 

So, let’s assume that you’re able to hit that 30-year-old savings goal of about $50,000. If you’re starting to save in your early 20s, that should be pretty achievable, even if you’re not earning a ton of money. 

So, at age 30, you’ve got $50,000 in the bank. And, then, every month for the next ten years, you contribute $900 into your savings account. Assuming a fairly modest annual return of 5%, that $50,000 is going to turn into over $220,000 over the course of 10 years. That’s nearly $45,000 higher than that 40-year-old savings goal for the average person we mentioned earlier, which was only around $175,000. 

Even if you only start out with $30,000 at age 30 instead of $50,000, you’re still in great shape. If you’re able to contribute that $900 per month, you’re looking at $187,000 by the time you’re 40. 

Let’s say you start with $30,000 at age 30, you have a 5% annual return, and you keep contributing $900 monthly until you’re 50. That brings you to nearly $445,000 by the time you’re 50, which is way over the average recommended savings goal at that age. Keep everything else constant and change the time period to 30 years, bringing you to age 60, and you’ll have a whole $863,000, which is double the recommended average savings goal for that age. 

So, as you can see, if you budget your money and consistently put money into your savings, you can easily reach these financial benchmarks and beyond and be ready to retire by the time you’re 70 or possibly even earlier. 

But, to go back to the very start of this article, the benchmarks that I used in this video are for the average person, and you need to figure out how much you’re going to need, depending on your lifestyle and needs. 

Regardless of what your ideal retirement goal is, you can use that same methodology that I just showed you to calculate how much you should have in savings at each stage of your life. Then, when you’re older, you can retire stress-free!