Workers often find themselves struggling with how much they should be saving for retirement. While it certainly depends on your situation, experts have general guidelines on what you need to have saved at each stage of your life. Show
For example, experts at Fidelity Investments recommend that you save:
Here’s how those numbers break down based on age, average income and monthly expenditure, according to nationwide data. Also included are emergency savings goals for three and six months of spending. Topics covered on this page:
Average retirement savings goal by age
Note: Retirement savings goals are based on Fidelity’s recommendations above using data in the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey, 2019. Emergency savings goals are calculated using the average annual expenditure mean for that age group in the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey, 2019. Think of these savings targets as less of an exact number and more of a general guide. They will show you how your emergency savings and retirement account balances stack up to the recommendations. Below you’ll find a full savings guide that estimates how much you should have in savings and retirement accounts at different age milestones. Sign up for Bankrate’s myMoney today to track your finances in one place. How much do I need in an emergency fund?Let’s start with your emergency fund. Standard financial advice says you should aim for three to six months’ worth of essential expenses, kept in some combination of high-yield savings accounts and shorter-term CDs. “For a working individual earning income, the goal should be to have just enough cash to provide an emergency buffer to protect against any pitfalls that could hinder financial well-being,” says Sergio Garcia, a certified financial planner at BFS Advisory Group in Dallas. Broadly speaking, there are six key costs to focus on: housing, transportation, food, health care/insurance, utilities and other household expenses. The first two categories typically require the largest monthly payments. How much you need to save to survive an adverse life event comes down to you and your family’s financial situation and security. A two-income family, for example, may only need to have three months’ worth of expenses, because of the greater stability offered by two earners. But if there is only one income, or wages are largely commission-based, “the amount held in cash should be closer to six months of expenses, or even longer,” Garcia says. An easy formula for figuring out what your suggested emergency savings range may look like is by multiplying your monthly expenses by three and six. You can also get a sense of your savings’ target by age by looking at recent data from the Bureau of Labor Statistics (BLS). The BLS data show average annual income and expenditures by age and type. How much do I need to save in my 20s?Households led by someone between the ages of 25 and 34 earn an average of $76,187 a year before taxes, according to the BLS’s 2019 Consumer Expenditure Survey. Couples in their 20s should have about one times their salary socked away in retirement accounts. As for your emergency fund, these households spend a monthly average in the following categories:
Toss in an estimated $68 per month on other household expenses and that monthly essential spending costs $3,797. Saving anything may seem like a challenge after graduating. But the important thing is to start saving, and to start small, such as putting aside a few hundred dollars into an emergency fund. Consider taking on a side gig or second job to generate a little extra income for your savings. Or you can consider some passive income ideas. As you gain work experience and move onto a career track, you can amp up your contributions to your emergency fund and to your retirement account as well. Here’s what you should plan on saving by the time you reach age 30: Retirement savings goal: $76,187 Emergency savings goal: $14,282 to $28,564 How much do I need to save in my 30s?Those aged 35 to 44 earn an average income of $103,272 before taxes, according to BLS data. Conventional wisdom states couples in their 30s should have three times that amount saved for retirement. Their estimated average monthly spending consists of spending in the following categories:
That comes to a total of $4,877 a month. Here’s what you should plan on saving by the time you reach age 40: Retirement savings goal: $309,816 Emergency savings goal: $18,722 to $37,445 How much do I need to save in my 40s?This is the time you hit your peak earnings. It’s also when you’ll spend the most money in your life. Those aged 45 to 54 earn an average yearly income of $107,094 before taxes. Experts say those in their 40s need six times their earnings in their retirement accounts. Overall monthly expenses remain elevated during this decade. While housing costs actually go down slightly to $1,990 a month, other expenses remain at similar levels or rise:
Those amounts total $4,894 a month. Here’s what you should plan on saving by the time you reach age 50: Retirement savings goal: $642,564 Emergency savings goal: $19,339 to $38,678 How much do I need to save in my 50s?Time to wind down. You’ve probably moved on from the most stressful period of your career, either voluntarily or not, and now you’re preparing for the last third of your life and retirement. That’s why earnings and spending start to fall. Those aged 55 to 64 earn an average yearly income of $99,606. Once you get into your 50s you’ll want to have saved at least eight times that for retirement. Thankfully you may need less in your savings account during this time. This age group spends a monthly average on the following categories:
That’s a monthly total of $4,389. Here’s what you should plan on saving by the time you reach age 60: Retirement savings goal: $796,848 Emergency savings goal: $17,373 to $34,747 Other common savings goalsOf course, there is more to life than simply saving up for emergencies or socking away every spare penny for your retirement. Important as those goals can be, you’ll also want to save so you can take advantage of the good things life throws your way, whether it’s getting married, buying a house or simply going on a vacation with your family. Whatever it is, you’ll want to have some money saved up, especially if you want to avoid getting saddled with thousands of dollars in expensive, credit-card debt. You may want to open separate savings accounts for these additional expenses in order to avoid diluting your emergency fund. If you are looking to save a couple years out, say for a new car or a down payment on a home, you might consider putting money into a money market fund or a CD, which could earn a bit more interest than your typical savings account. However, when you start saving for a child’s college education, the costs graduate into an entirely new level. According to the National Center for Education Statistics, here are the average tuition and fees for the 2019-2020 school year:
For parents, that means having to save a lot of money. (You can crunch the numbers using Bankrate’s college cost calculator.) For college, you may want to look at a 529 savings plan, which is offered by most states. These college savings plans work like an IRA or 401(k), with contributions invested in mutual funds and other financial assets. Money invested in 529s use after-tax dollars, but your earnings grow tax-free. Some states also provide tax deductions for contributing to these plans, so it can be worthwhile to check on whether your state does so. How much should I have in my 401(k)?The average contribution rate and retirement savings account balances can give you an idea of what others are saving. Here are the national averages by age, according to a 2018 Fidelity study of its 401(k) accounts.
How can you boost your 401(k) balance? Those who are fortunate enough to work for a company that matches a certain percent of contributions should try and take full advantage of that benefit. After hitting your match, make your emergency fund and money that can go toward paying high-interest debt, if applicable, your top priorities. Bankrate’s 401(k) calculator can help you estimate your retirement earnings. What you can doIt’s never too early to start saving. Your 20s are an ideal time to save for the future. Here are some other things to boost your savings:
Prioritize your savings goalsBudgeting and then saving is the first step. But then you have to make sure you’re properly prioritizing your savings goals. Consider an emergency fund to be your most important savings goal. Saving for this during good times is going to help you during an inevitable bad time. There’s no way to predict the cost of that unplanned life event. If you get lucky with a salary raise or bonus, take it straight to the bank and try to live beneath your last salary. And when a debt is paid off, or an ongoing expense evaporates, put that money toward your emergency fund. Automate as much as possibleNot having to remember to put away money makes saving easier. Automating saving is one of the most effective ways to achieve your savings goals. There are a couple of ways to do this:
This same principle applies to contributing to retirement. Those fortunate enough to have a 401(k) plan at their workplace can automate their retirement savings. This again shows the power of set-it-and-forget saving. Consider investingA savings account might not be the best option for long-term money. Once you have an emergency fund, you might be ready to invest. You’ll also want to determine:
Savings accounts and CDs that are within FDIC limits and guidelines are some of the safest places to put your money. However, over time you’re more likely to make much higher returns by being invested in a diversified portfolio of stocks. But you’ll have to be comfortable with more risk, too. |