This is a question that many people don’t even think about until it’s potentially too late. If you are in your 20s, 30s, or 40s now is the time to establish good habits with putting money away at an early age to build your nest egg. If you’re nearing 50 and want to ensure you’ve saved enough for retirement, this blog will help answer some of those questions.
How much you save for retirement depends on the life you want to live in your golden years. For example, do you see yourself as a globetrotter or homebody? Setting financial goals and milestones at ages 30, 40, 50, and 60 can help ensure that there is still money available to enjoy the lifestyle you desire when the weekly paycheck stops coming in.
There isn’t one perfect recipe for retirement savings. Every person’s retirement plan is unique. But here are some guidelines that can help you make decisions on how much you should be saving throughout your career.
Getting Started in Your 20’s
In your early 20’s, you might still be living with your parents and getting by on a meager salary. But once you’re achieved financial independence and living in your own home, that gets to change: You have more income than in years past, but you might also have debt accumulated from student loans or other expenses. So find ways to save, like traveling less often – say once every few months instead of monthly – spend money on necessities and experiences and put the rest into savings. If you’re looking for tips on how to start saving, check out our blog posts on learning good financial habits and budgeting.
Now is also a great time to open a retirement savings account such as an IRA in addition to contributing to your company-sponsored 401(k) plan. A 401(k) calculator can help you determine how much you’ll have when you retire as you determine what your expenses will be. Learn more about the advantages of using a retirement savings calculator here.
Current Salary x 1 = Total Savings at Age 30
At age 30, you will need to put away an amount equal to your annual salary for retirement. For example, if your salary is $55,000, you should have $55,000 saved in a retirement account. You are just hitting the stride of your career, and if you can, being an aggressive investor in your 30’s can pay off in dividends in your retirement years.
You can use our investing tool, Bespoke Portfolio Service, to see how you can diversify your retirement savings portfolio, where and how much to invest. One of the first digital advisors built into a 401(k) platform, Bespoke uses a proprietary algorithm to custom craft a retirement saving and investing plan unique to your individual goals and life circumstances. If Bespoke is not available to you, speak with a financial professional who can help shape your investment lineup and evaluate your risk profile.
Current Salary x 3 = Total Savings at Age 40
To have enough saved for retirement by age 40, a recommend savings strategy is to already have put away three times your annual salary.
Either way, saving $15-20K per year from now until age 50 could make all the difference in meeting future goals. Like buying a vacation property or retiring early if desired – without worrying about running out of money. For more retirement savings and financial planning tips, we’ve compiled a list of our six favorite financial wellness podcasts covering various financial topics.
Current Salary x 5 = Total Savings at Age 50
Now would be a great time to start catching up on your savings by setting aside at least $25-35K per year from this point forward. Take advantage of the catch-up contributions allowed by the IRS at age 50 or over, in addition to your regular 401(k) contributions. This is a great way to “catch up” with your savings and potentially take advantage of further tax benefits by reducing your taxable income. It’s never too late!
Current Salary x 7 = Total Savings at Age 60
By age 60, most people think about their golden years when they want to slow down and enjoy life without working so hard anymore. This is also the time to make a push toward paying off debt and amassing an emergency fund for retirement. Pay attention to your credit score and credit utilization rate so that you can refinance your home with a lower interest rate in case of emergencies later on. Live within your means, pay off bills, especially high-interest credit card debt, and put away money for living expenses during retirement.
Read and subscribe to our blog for more information on financial wellness and retirement savings topics! You can also use our retirement path calculator to give you personalized suggestions depending on where in life you are right now.
No matter what stage in life you’re in, Slavic401k is here to partner with you on your retirement journey.