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How Much to Save at Every Age

October 12, 2022


Abstract money patterns

When it comes to retirement savings, starting early and maxing out contributions is best. But what if you started saving late, or suddenly lost your job in your 40s? How do you know if a setback still leaves you on track for retirement?

That’s where knowing how much you should have saved up at every age can help. Let’s explore where you are in your retirement savings journey and how to get where you want to be.

Talk to a CFS* Financial Advisor

Want to take your retirement plans to the next level? Schedule a Amplify Wealth Management appointment with our colleagues at CUSO Financial Services (CFS).

How Much Do You Need to Retire?

To know if you’re on track, you’ll need an idea of how much you’ll need in retirement. The total that’s right for you will depend on a lot of factors, including:

  • At what age you want to retire
  • Whether or not you are eligible for Social Security
  • Your health
  • What you want to do in retirement

If you want to retire early, your savings goal will need to be higher, as will your monthly contributions. Or on the other hand, if you don’t see yourself as ever fully retiring and working part-time in retirement, then you may not need to save as much.

To help determine what your savings goal should be, try using our retirement planning calculator.

Retirement Savings Examples

Let’s look at a couple of example scenarios and see how small changes in retirement goals like retirement age and life expectancy can affect your overall savings needs. For all examples, we’ll assume you are currently 20 years old and your income is $40,000 a year. Please note: this is not a recommendation; this is a casual estimation of what someone might save for.

Example 1

  • Expected Retirement Age: 65
  • Income Needs: 80%
  • Life Expectancy: 85
  • Estimated Retirement Savings: $1,572,967

Example 2

  • Expected Retirement Age: 75
  • Income Needs: 60%
  • Life Expectancy: 85
  • Estimated Retirement Savings: $720,339

Example 3

  • Expected Retirement Age: 60
  • Income Needs: 80%
  • Life Expectancy: 90
  • Estimated Retirement Savings: $2,135,096

As you can see in the above examples, a small change can result in a huge difference in savings needed. For instance, someone retiring later in life with less income needs (example 2) might need a third as much as some retiring early with higher income needs (example 3).

How Much Should You Have Saved?

Now that you have a savings goal, it’s time to look at where you are in achieving that goal. So let’s look at a breakdown of how much to have saved at every age.

Age 20: More than $0

It’s important to start saving for retirement as early as you can. That said, there are financial issues that are higher in priority when you are in your 20s, such as paying off student loans or building an emergency fund.

The earlier you begin saving, the more compound interest can help grow your savings. Opening a retirement account and making contributions is a great goal for your 20s. Even contributing a small amount, like $10 a month, is a start.

Age 30: Your Annual Income

The general rule of thumb is to have the equivalent of your current salary stashed away for retirement by age 30. But this isn’t reality for everyone!

If you started saving late, having your salary saved isn’t a realistic number. Don’t worry! There are many paths to take to your retirement savings.

If you find yourself behind where you’d like to be, don’t stop saving. Try setting a more realistic goal for your budget. Make a timeline to see how your contributions might be able to increase in the future. Whatever the amount you can contribute, practice consistency and automating your savings in your 30s.

Age 40: 25% of Your Retirement Budget

Let’s be honest: the flaw with the X times your income model is that it doesn’t account for dramatic income shifts like losing your job, changing careers, starting a family, or getting a promotion. Some say you should have 3x your income, but that just isn’t possible for some folks.

Try aiming for at least a quarter of what you’ll need in retirement saved up. For example: if your goal is $800,000, try to hit the $200,000 mark at some point in your 40s. And if you are falling short of this goal, don’t worry; you still have time to catch up.

50: Half Your Retirement Budget

If you’ve reached the halfway point on your retirement savings goal, this is where compound interest kicks into overdrive. Compound interest needs time to work, and as your savings piles up, it starts to grow exponentially.

Maybe you’ve had a few rough years and you’re not where you want to be. The IRS provides age-based tax incentives, allowing you to make catch up contributions once you hit age 50. Take advantage of these tax benefits if you can, and work on your savings momentum.

60: 80-90% of Your Goal

You’re in the final stretch now. Considering this, you’ll want to have reached 80% – 90% of your savings goal. You’ll also want to look at any remaining debt and see if it fits your financial goals. Paying down debt can be a great way to trim your retirement budget—but only if it works with your bigger financial picture. (This is where a retirement or financial advisor can come in handy!)

Falling short of the 80% mark? Consider increasing your contributions or delaying your retirement / disbursement age. If you’re very short of your goal, it’s time to sit down with an advisor and make a new plan. There are so many options for funding your retirement, and the sooner you prepare, the better!

Retirement: The Ultimate Goal is Personal

Ideally, you’ll have reached your goal before you retire, giving you time to switch your savings into stable investments. But that’s not everyone’s journey!

If you’re not quite there, or you retired early, it’s time to look to your budget and stretch your savings further. It could be as simple as traveling less, or as complex as downsizing your home. You might also work part-time, to help fund your retirement budget.

Life is full of circumstances out of your control, and your retirement goal is just that—a goal. When you transition into retirement, it might look different than you imagined in your thirties. The important part is to regroup, look at what you have, and work with what you got.

Start Retirement Planning Now

Where you save your money for retirement is just as important as how much you save. For example, a high-yield savings account can be good for stashing your emergency fund, but doesn’t give you the tax advantages or higher interest rates that a retirement account would.

Contributing regularly to your retirement savings accounts is a great way to work toward your overall goal. Everyone’s contributions are different, depending on where they are in their saving journey—but experts typically recommend that you save around 15% of your income, including your employer match.

Not quite there yet? Start small and set up automatic savings contributions. Don’t stress too much about reaching every financial milestone on time. Focus on retirement savings goals that make financial sense for you, and make a solid plan to get there.

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer Member FINRA/SIPC and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Before deciding whether to retain assets in an employer-sponsored plan or rollover to an IRA an investor should consider various factors including but not limited to: investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock. Before you elect to open an IRA account and engage your investment representative, please review all account statements and disclosure documents related to the IRA and services to be provided under a new relationship and consult with a qualified tax advisor as needed. If transferring an existing retirement plan into an IRA, you should be aware that (i) Those assets will no longer be subject to the protections of ERISA (if applicable) (ii) depending on the investments and services selected for the IRA, you may pay more or less in transaction costs than when the assets are in the Plan, (iii) if you are between the age of 55 and 59 ½, you would lose the ability to potentially take penalty-free withdrawals from the plan, (iv) if you continue working past age 70 ½ and transferred your plan assets to a new employer’s plan, you would not be subject to required minimum distribution and (v) withdrawing assets directly would be subject to federal and applicable state and local taxes and possibly be subject to the IRS penalty of 10% if under age 59 ½.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.

Talk to a CFS* Financial Advisor

Want to take your retirement plans to the next level? Schedule a Amplify Wealth Management appointment with our colleagues at CUSO Financial Services (CFS).