Every 20-, 30-, and 40-something is unique, same as every teenager and senior — and that’s why stage-of-life financial advice is so hard to give. Even so, it is possible to outline a savings horizon that spans decades into the future.
While incomes, earning potentials, life circumstances, goals and endless other variables mold each person’s journey, a few general guidelines, ratios and percentages have stood the test of time. GOBankingRates spoke with several experts to learn more about those savings guidelines and how you can tailor them to suit your life and its many stages.
Saving in Your 20s: It’s OK To Get Started Slowly, but Get Started
Most people get their first financial reality check in their 20s when they move out on their own for the first time.
“For example, sometimes you may have to pay the first month and security deposit upfront,” said Snigdha Kumar, personal finance expert and head of product operations for the money app Digit. “And keep in mind furniture, groceries, electricity, etc.”
Hopefully, the experience will reinforce the need to have money in the bank and cash on hand — Kumar suggests starting out by trying to save three times your monthly rent.
That may seem like a lofty goal, but experts urge young people to get in the habit of building a surplus to help them endure the unexpected.
“In your 20s, you should mostly work toward your emergency fund,” said Imani Francies, a personal finance expert with US Insurance Agents. “If you have room financially to save for more than your emergency fund, go for it.”
In Your 30s: Get Serious About Saving
Life is different for everyone during this decade too, of course, but for many people, their 30s bring kids, a home, more income and a much greater responsibility to save than ever before.
“The main goal for this stage of life is stability,” said Kumar. “Emergency funds should have three to six months of expenses at a minimum, and for a more aspirational goal, aim to save for 12 months.”
Middle Age: The Future You’ve Been Saving for Is Just About Here
If you started saving in your 20s, you’ll be grateful for your early efforts by the time you reach your 40s. However, if you thought it was hard to save when you were young and free, wait until you get to middle age. By this point, many people are planning to pay for their kids’ college at the same time they’re trying to save for retirement. Likewise, plenty of people spend this stage of life sandwiched between the financial rock and a hard place of caring for aging parents while also raising young children.
Without a healthy savings account, the present will be a challenge and the future could be a bust.
“Two to three times the current income is a good benchmark for age 40 and four to five times for age 50-plus,” Kumar said. “If they don’t have enough stacked away for retirement, then this is a good time to play catch up and save in order to prepare for retirement. You can contribute more to a 401(k) as well as IRAs to build your retirement nest egg.”
In Your 60s: You’re on Deck for Retirement
By the time you enter your seventh decade, you should be putting the finishing touches on a lifetime of saving — but don’t panic if you’ve fallen behind.
“If they don’t have enough stacked away for retirement, then this is a good time to play catch up and save in order to prepare,” Kumar said.
The Secure 2.0 Act of 2022 relaxed many restrictions on retirement plans to incentivize late-life saving. The legislation removed age barriers on contributions — even beyond 70 — loosened the standards for required minimum distributions (RMDs), expanded catch-up contributions and more.
“You can contribute more to a 401(k) as well as IRAs to build your retirement nest egg,” said Kumar.
If you’re not where you should be at 60, be grateful that you’re 60 now — there’s never been a better time to be a senior saver.
Marco Sison, a financial coach with Nomadic FIRE, believes that savings strategies at every age should be calculated with the same goal in mind: retirement.
“The average cost of retirement is roughly $750,000,” Sison said. “More than the combined cost of university education, raising a child and buying a home. The best way to ensure you are saving enough for retirement is to use a spreadsheet and calculate the present value of your goal at specific ages.”
Sison scratched out the math. “To retire with $750,000 by age 70, you will need to have saved $46,000 before you turn 30, $92,500 before you turn 40, $186,000 before you turn 50, and $373,000 before you turn 60,” Sison said. “For a quick calculation, estimate your nest egg doubles roughly every 10 years, assuming a 7% annual return on your investment.”
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