It’s always good to have some extra money in the bank, right? But saving isn’t exactly intuitive for many of us. How do you know your money-saving goals are on track? And how much money should you really have saved by 30, 40, 50 or 60?
In our 20s most of us are working to establish careers and—let’s be real—simply get into the habit of saving money. And in the past, we’ve shared how much moolah the average person should have saved by 30. (Hint: It depends on your unique situation.) But the second half of your life is when major expenses might come into play. You may be taking care of family, managing childcare costs, or saving to put your kids through school. Or you might be working toward your retirement plan and paying off a mortgage. All of this means that budgeting with the mentality of flying by the seat of your pants is long gone.
Which, brings us to the all-important question: How do you know how much money you should really have saved by 40, 50, and 60?
To help you set some smart #moneygoals, we asked the experts for some pointers. Here’s what they had to say.
“How much money should I have saved at every age?”
No one is going to argue against having solid money goals. But here’s the thing, your money goals are undoubtedly different than the person next to you (unless that’s your spouse and you share a joint account—in which case, you should have the same money goals!). “The danger with rules of thumb is that they can be discouraging because if you have not reached a level, you may feel like a failure,” Morris Armstrong , owner of Armstrong Financial Strategies in Cheshire, Connecticut told Girlboss.Armstrong suggests trying to put as much away in your savings by age 40 as you can to establish a “good nest egg.” This allows you to put in less money over time. How? You’ll already have a large base that’s earning interest. Then you can focus on college expenses for your children, or your retirement plan, and not have to save quite as much during your 50s and 60s.
“In terms of salary, some studies suggest that your savings should be at least 10 times your final salary if you are retiring at 67,” Armstrong said. You can focus on aiming for saving your yearly salary by age 30, three times as much by age 40, six times as much by age 50 and 8 times as much by age 60. Still, don’t let yourself get discouraged Armstrong said. “Do the best that you can and monitor your progress. Invest appropriately,” he explained.
While you should be saving aggressively during your younger years, determining a static number to reach by 40 can be discouraging. After all, this isusually the time when people are spending a lot of their finances on their children or buying homes, Tatyana Bunich, president and founder of Financial 1 Wealth Management Group in Columbia, Maryland told Girlboss.
Still, she said by age 60, “people’s end goal should be to have around 15x their income in savings.” While that might seem like a very large number, Bunich explained that you can get there by saving 15 to 30 percent of your annual income (ideally). This includes all of your savings efforts, though. Think: your emergency fund, your retirement plan, etc.
“A great rule [to go by] for most Americans is to take your age, divide by 10, then multiply that times your annual salary to know how much you should have in retirement savings,” Taylor Kovar, CEO at Kovar Capital, said. If you’re living in a city with a high cost of living, Kovar suggests taking your age and dividing it by 5x your annual salary.
Here’s an example: Take a 40-year-old making $75K/year. That’s a goal of $300k in savings! (40 /10 = 4 * $75K = $300K)
Without factoring in other variables, you can estimate that you’ll need about 80 percent of your pre-retirement income once you retire, Luis F. Rosa, a certified financial planner and founder of Build a Better Financial Future, LLC, said. “I recommend that you figure out how much income per year you’ll need during your retirement … then work backwards to see how much you need to save in order to achieve that goal based on how many years you have left until the date of retirement.” You’ll also want to deduct other expected forms of income like social security or pensions to determine the gap you need to fill.
Ally Federbush, head of communications at STASH Wealth, agrees that setting savings goals per milestones can be challenging. Instead, Federbush advises figuring out what it is you want to do in retirement and where you want to live. Once you’ve determined whether you’ll need more funds to travel the world, or less money because you’ll live a more frugal lifestyle, you can focus on the dollar figures.
Federbush recommends using free online calculators to help figure out your savings goals. For instance you can use the savings goal calculator from the U.S. Securities and Exchange Commission. “Savings calculators can help you see how much money you need to set aside each month in order to reach your financial goals and to retire by 65, or any other age,” Federbush says. “Try playing with these calculators and inputting different numbers to see what’s possible. Even minor changes to your saving and spending habits can have large effects on the eventual outcome.”