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How Much Money Should I Have Saved by 30?

Many people dream about retirement as a time to relax, have fun or just do whatever they want. To have the retirement of your dreams, you’ll need savings. How much you need depends on multiple factors so let’s take a look at the answer to the question “how much money should I have saved by 30?”

How Much Money Should I Have Saved by 30? – Rule of Thumb

Financial experts generally advise people to have at least 1x their salary saved for retirement by 30. In other words if your annual salary is $40,000, then you should have at least $40,000 saved for retirement by the time you’re 30.

Simple, right? Now it’s important to note that this rule doesn’t apply to everyone. The amount of savings that you should have depends on your individual situation. Having 1x your salary saved by 30 is great, but there isn’t one savings amount that every person should reach by 30.

For the moment though, think about that 1x rule. If you have that much saved already, well done! Most of us don’t have that much. In fact, many people live paycheck to paycheck and the average American has no retirement savings at all. So what should you do if you’re a little behind in your savings? Well there is good news: You still have time. If you’re 30 and plan to retire at 65, you have 35 years to build your retirement savings. The key is to start saving now – even if you don’t have much.

Figure Out How Much You Need

Experts say you should have about 1x your salary saved, but that’s a general rule. How do you know what savings you personally should have? One thing you can do is create a plan for your retirement.

Perhaps you’re wondering how you’re supposed to create a plan for something that’s so far in the future? It’s true that it’s hard to know where life will take you. If you think about it though, there are probably some things that you know you want to do in retirement. Maybe you want to travel the world. Maybe you want to spend your retirement relaxing or volunteering. It’s also possible that you want to live in New York City and watch Broadway performances every week.

No matter what you want to do, sit down and think about it. If you think about the lifestyle that you want to have, you can also think about what kind of savings you’ll need. Think about how much money you might spend each month or year of your retirement. Yes, this is a little tough to do. It requires some thought and maybe some research.

Once you have an idea how much you need to save for retirement, you can work your way backward. Let’s say you want to have $1 million in retirement savings (it isn’t as crazy as it sounds!) when you retire in 30 years. In that case, you’ll probably want to have about half a million saved within the next 15 years.

If you work backward in this way, you can create savings goals for next year or for 20 years down the road. You’ll know how much you personally need by the time you’re 30, 40 or 50. Even if your goals are high, you’ll know exactly what you need to do to reach them. Didn’t meet your goal this year? It’s OK. Just keep going and try to make up the difference one day when you have a little extra money.

And once you’ve created your goals, stick to them. Don’t let other peoples’ lifestyles influence your spending. Patrice Washington, American’s Money Maven, finds drawing comparisons to be a particular problem.

As she told SmartAsset in an interview, “My best savings tip for 20-somethings is to always remember that comparison is the thief of joy. Don’t base how much or how little you will save today because of trying to keep up with other people online or in real life. Set a goal and keep your eyes on the prize.”

Where to Save for Retirement

How Much Money Should I Have Saved by 30?

There are a lot of ways to save for retirement. Your employer might offer a 401(k) plan. Maybe you have a Roth IRA where you’ve slowly been saving your after-tax dollars. It’s OK to have your retirement savings in multiple places. Just make sure that you can keep track of where all your money is. If you changed jobs a few times and you have money just sitting in the 401(k)s of former employers, you might want to think about consolidating with an IRA rollover.

As for where exactly you should save your money, there is no hard-and-fast rule. If you work for a for-profit employer, the company probably has a 401(k) plan. If your employer also offers a match on your 401(k), you should contribute at least enough to cover the full match. Not covering the match is passing up free money.

As money saving expert Andrea Woroch explained to SmartAsset, covering the employer match on a 401(k) is one of the best things that you can do in your 20s. “Take advantage of any company match and keep in mind, even a little bit helps! The money you put away at a young age will grow exponentially thanks to compound interest to help meet retirement goals faster and with less money contributed overtime.”

After considering your employer-based retirement plan, you might want to think about contributing to a Roth IRA. It’s a good idea to save money in a combination of pre-tax accounts, like 401(k)s or traditional IRAs, and after-tax accounts, like Roth IRAs.

One option to consider is a robo-advisor. Robo-advisors create and automatically manage an investment portfolio based on your current savings and your future goals. Investing isn’t as difficult as it sounds and it’s the best way to grow your money. Robo-advisors will also handle the nitty-gritty work so that you can focus on saving money. There is a management fee for using a robo-advisor but the fee is much lower than anything you’d pay with a traditional financial advisor.

The Bottom Line

How Much Money Should I Have Saved by 30?

Many financial experts recommend having at least 1x your salary saved by 30 years old. This is a useful rule of thumb but it’s just a guide. The amount that you should have depends on your personal savings and your retirement goals. Creating a retirement plan for yourself will help you figure out just how much you should save (and by what age) in order to have your dream retirement. Remember that even if you don’t have a lot to put toward retirement right now, a little bit is better than nothing at all.

If you’re struggling to get started or stay on track with retirement saving, consider turning to a financial advisor for help. A matching tool like SmartAsset’s can help you find a person to work with who meets your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

Tips to Help You Build Savings

  • Many people have a difficult time saving money because they live above their means. This is especially true when people graduate from college and get their first job. In an interview with SmartAsset, savings expert Andrea Woroch shared some advice for recent grads. “Stick to your college budget even if you scored a good job! With a steady paycheck coming in, [college grads] feel rich and may end up blowing their budget by purchasing new TVs, cars and going out to expensive dinners. When you’re in your 20s, don’t get tempted to inflate your lifestyle.” If you didn’t have a college budget, you can start a solid budget now with the help of SmartAsset’s budget calculator.
  • Are you sticking to a budget but still don’t have quite as much money as you’d like? Consider some of these money-saving tips to help you find the savings you’re missing out on.
  • A Roth IRA and traditional IRA both offer benefits for savers. Unsure which is better for you? Here’s an article to help you choose between a Roth IRA and a traditional IRA.

Photo credit: ©iStock.com/FYMStudio, ©iStock.com/andresr, ©iStock.com/Minerva Studio

Derek Silva, CEPF® Derek Silva is determined to make personal finance accessible to everyone. He writes on a variety of personal finance topics for SmartAsset, serving as a retirement and credit card expert. Derek is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance® (CEPF®). He has a degree from the University of Massachusetts Amherst and has spent time as an English language teacher in the Portuguese autonomous region of the Azores. The message Derek hopes people take away from his writing is, “Don’t forget that money is just a tool to help you reach your goals and live the lifestyle you want.”
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