Amidst the hustle and bustle of life and juggling work, social calendars, and everything in-between, retirement is typically not a top-of-mind consideration. That’s why knowing how much you should save by 30 or 40 is often a mystery and a question one doesn't even think to ask.
And, to be honest, the answer to this question will most likely vary depending on who you speak to, as every financial expert has their own opinion on what a healthy savings account should look like by 30. That said, according to NerdWallet, you should have an amount equal to your annual salary saved by this age. Harrine Freeman, financial expert and CEO/owner of H.E. Freeman Enterprises, suggests a similar figure, saying $100,000 is ideal for a solid retirement plan. “If you have less than that or nothing saved, you’re definitely behind the curve and will have to make up for that difference or plan to work past retirement age,” she says.
According to finance guru, by the age of retirement, which is typically 60 to 65, one should have seven to eight times their annual salary saved. However, it seems hitting this goal is becoming increasingly difficult for many Americans. According to a recent survey from Bankrate.com, "The average American has less than $5,000 in a financial account, a quarter to a fifth of what you should have, and those aged 55 to 64 who have retirement savings only carry $120,000 — which won't last long in the absence of paychecks.”
So how does one avoid this fate and ensure they are putting aside enough each month to ensure a nice little nest egg later? Many factors are considered for one’s specific savings plan — when and where you plan to retire, financial obligations, children, health status, etc. — but one should aim to put away no less than 10 percent of their monthly salary every month, says Freeman. “If you don’t have children, you should aim to save about 20 to 25 percent to really maximize that cash flow,” she instructs. “If you have little to nothing saved, this percentage goes up even more and should be around 35 to even 50 percent.”
Freeman also suggests creating a practical and doable budget for yourself and automating your savings for retirement each month. Consulting with a professional is also key, and a step that many make the mistake of skipping. "Hire a financial planner, see what your balance is and compare that to what you want your balance to be,” she suggests. “This may require you to keep your contribution the same or even decrease it if you’ve been contributing at a higher rate.”
While enrolling in a 401(k) plan with your employer (if they offer one) is a great start in building a solid savings plan, Freeman says you should also set up your own IRA (individual retirement account) through reputable financial institutions like Charles Schwab. “Look at the company’s annual financial reports and financial profile,” she says. “See if they’ve been around for along time, had any financial troubles, layoffs, or any significant changes in leadership.”
There are also plenty of savings apps and online resources at your fingertips — literally — that help make savings a breeze. “Quapital is a helpful app, says Freeman. “And Morningstar has a great online tutorial on saving.”