How Much Money You Need To Save By Age? - Get It Done Blog (2024)

Knowing how much money you need to save at every age will help you plan your retirement. By doing this you’ll know if you’re on track or not.

After all how much money we need is going to be relative to how the money we make, our lifestyle, and where we live. Someone who has expensive taste and lives in California is going to need a lot more money saved away in order to live comfortably compared to someone else in Montana who is a minimalist.

• 20 years old: -$27,000
• 30 years old: 1* of your annual salary saved up
• 40 years old: 4* of your annual salary saved up
• 50 years old: 8* of your annual salary saved up
• 60 years old: 12* of your annual salary saved up

This is a really important measurement to keep track of. Because without knowing if you’re saving enough you won’t be able to properly adjust your spending.

Now, I promise if you read the entire post you’re going to know exactly how much money to save at every age in order to live indefinitely off your investments without ever needing to lift a finger.

Here’s exactly how much money you need to save by every age and my own recommendations:

20 Years Old:

The average 20-year old has a net worth of -27,000$. What is the net worth? It’s calculated by adding up everything they own of value and then subtracting what they owe in debt. Then the result is their net worth.

And Yes, the average 20-year old owes $27,000 more than what they have. And the reason for 20-year olds being in so much debt is student loans.

Young adults are taking off 10s of thousands of dollars worth of student loans. That’s why, instantaneously, they could owe so much more money before earning a single penny.

My recommendations for 20-year olds:

1. Get a credit card

The point of this is to begin building up your credit score. And because 50% of your credit score is made up of your on-time payment history and how long you’ve had your credit for, this is something you really want to do as early as possible.

Not to mention, having a good credit score is so important. Your credit score can easily save you a lot of money. It can even be the deciding factor whether you get the loan or not.

So just open up a secured credit card. Then, put a few expenses on it every single month. And most importantly, pay it off in full consistently by the time it’s due. I have another post where you’ll learn how to get a perfect credit score.

2. Open a ROTH IRA

At 20-years old there is no excuse for you not to open up a Roth IRA. Just open an account with Vanguard, Fidelity, Charles Schwab, or a multitude of the other free brokerages out there. Even if you don’t contribute to it just please open one.

The advantage of this account is that all the profit you make within the account is going to be completely tax-free by the age of 59 and a half. To learn more you should read more about Roth IRA.

3. Save 1 or 2 months of your expense

I would like you to have one to two months of your expenses saved up. This one is meant to be your emergency fund. This way you’ll always have some cash to fall back on.

For example: if you normally spend $800 per month you should aim to save $800 to $1,600 in a high-interest savings account where you can pull from it in the event you need it.

4. Start investing

By 20 years old just get yourself invested in the market in one way or another. I think it’s so important to at least begin investing at this stage. Even if it’s just $100.

So overall at 20-years old, there’s not really any savings or net worth goals that you should aim to hit. Instead, it’s really just about setting yourself up with a good foundation to build up from.

This includes sticking with good habits, staying out of debt, building a credit score, saving, and investing your money.

30 Years old

By 30 years old you should aim to have 1 year of your income saved up. If you want to know exactly how much that translates to, we could see that the median annual income at 30 years old is about $40,000 a year.

So according to the overall statistics, if you have $40,000 saved at 30 years old you’re on track. This also gets a little complicated if let’s say you doubled your income at 29. So all a sudden you don’t have 1 year of your salary saved anymore.

That’s why I think at the age of 30 a few other factors are a better indication of whether or not you’re on track.

My recommendations for 30 years old:

1. Credit score 750+

You should aim to have a credit score of at least 750. This is going to put you in a really good position financially to borrow money at really cheap interest rates.

And this is absolutely doable as long as you have a few years of credit-building history. Honestly, I’ve seen people go from nothing to having a 750 credit score in the span of three years.

2. No bad debt

I would recommend you become completely bad debt-free by the age of 30.

This means you paid off all of your debts or loans that were above the 5% interest rate. Also, you don’t have any credit card debt. And besides the possibility of maybe having a mortgage or something at a really low-interest rate you don’t really have anything weighing you down.

3. Save 1 year of your income

Aim to save 1 year of your income by the age of 30. The reasoning behind this is simple.

If you graduate college at 22 years old with an average of a $30,000 debt, most likely that’s going to take you somewhere in your late twenties to pay off. By which time you would have hopefully increased your income and live frugally.

This means that paying off your student loans and having one year of income saved up is doable but also can be quite an obstacle depending on how much money you’re making.

On the other hand, if you don’t have any student loan debt, then having one and a half to two times your income saved up by 30 could be very achievable.

4. Save 20% of your income

I think it’s pretty reasonable to aim to save 20% of your income every single month. I really believe a lot of these habits begin in your twenties. Habits like learning to live frugally and saving your money.

For example, one of the methods that work for me is that any time I end up making more money I just automatically invest it and then live as though that money never existed and I stay on my current income.

Try doing that anytime you get a raise or promotion. As soon as you get more money just automatically invest it. It’s out of sight out of mind. This way you’ll be able to increase your savings rate without really noticing much of a difference.

40 Years old

Now, when you’re in your 40s things should really begin amping up. Ideally, your career should be well on its way. Also, all the progress you’ve made in your thirties is beginning to pay off. Now, this is also the time where you should begin seeing your investments do all the heavy lifting for you.

Also, by 40 years old you should know exactly how much money you spend every single year. By this age, the amount of money you should aim to save is at least 4 times your salary invested.

That means if you’re going to be spending $35,000 per year in retirement, you’ll multiply it by 25 to 33. And that means you will need from $875,000 to $1,150,000 to be able to cover your needs. And when you’re in your 40s this is the amount that we should be focusing on.

This means if you realize your lifestyle is going to be costing you $40,000 a year, you’ll need 1 million dollars invested in order to cover that.

Then, from there we just work backward. If you’re 40 years old and spending $40,000 per year and already have $270,000 saved, so if you want to retire by 65 you will need $730,000 more and you have 25 years to do it.

Thankfully, you have time on your hands and your investments are going to do most of the work. This is also why it’s so important to save as much money as you possibly can.

My recommendations for 40 years old:

1. Max out your retirement account

You should aim to max out your retirement accounts every single year. This includes maxing out your Roth IRA at $6,000 a year or potentially a 401K.

2. Buy a house

You should also look at buying a house if this is something you’re interested in. This is going to give you some more stability in retirement. And you’re not going to be at the mercy of a landlord who’s trying to raise your rent when you’re 75 years old.

50 Years Old

Ideally, by this age the amount of money you need to save is more like 8 times your income to put you in a better position for retirement. You would be able to do this by saving more money when you’re younger; Or cutting back on your expenses as you begin making more money.

Basically, the sooner you begin planning for this the easier it’s going to be.

My recommendations for 50 years:

1. Pay off half your mortgage

Depending on your situation you should be about halfway through paying off your mortgage. Some people might have mixed feelings on this and whether or not it’s actually needed but this is my opinion:

I love good debt like this and having a really low-interest rate. But I think there’s also something to be said about having a primary residence completely paid off.

Even though I don’t want to have it paid off any sooner than I need to I think it’s a good idea as you get older in retirement to keep a paid-off property and not try to leverage it.

I think that you should leverage debt when you’re younger not when you’re about to retire. You’re at a point where you don’t need to maximize the value of every single penny.

2 Know your future spending

By this time you should have a very clear idea of how much money you’re going to need in retirement. Also, you should figure out when you plan to stop working so you can plan accordingly.

If you find out that you’re severely underfunded and there’s no way possible for you to make enough money to be able to retire, then I think it’s time you really revamp your lifestyle and try to spend a lot less money as you get older.

This could include moving to a different location or cutting back on your expenses. It doesn’t mean you won’t be making any more money in retirement.

I have a feeling most of us will continue working as we get older even if we don’t need to. But this is really just all about preparing yourself up for the option of not working whether it’s voluntary or out of necessity.

60 Years Old

By the age of 60, the amount of money you should aim to save is 12 times your salary saved.

That’s because if you start planning ahead and think about this when you’re 30 years old you will be able to easily achieve this just by saving 10% of your income and investing that at an average of a 7% return. And if you’re able to save 20% of your income, you’ll have 20 times your annual salary saved.

It’s all about taking small and easy steps now that are going to add up to a lot of money over time.

My recommendations for 60 years old:

1. Pay off your house

I think it’s a wise idea to have paid off your primary residence. Or if you haven’t done this yet you’re getting pretty close to it now. This is going to give you a lot more stability in retirement.

Also, having a home paid off is going to reduce your spending. You’ll have an asset and in case you need to sell it to take the money out or move somewhere else.

2. Save more money

Usually, this is the time where you’re earning potential may have peaked. So now is your chance to save as much of that as possible while you still can.

3. Retirement accounts

If you want to, now would be the time where you can begin withdrawing from your retirement accounts without paying any penalties. Remember all the profits you made within a Roth IRA could be taken out completely tax-free without any penalties after the age of 59.5.

You can also begin collecting social security income as well. But honestly, if you’re reading this and you’re under the age of 40 who knows if this is still going to be around by the time we’re older.

Conclusion

The goal of this post is to give a good idea of how much money you need to save at every age. In my opinion, the main takeaway is to start saving as early as possible and as much as possible.

To simplify, I think if you start saving at least 10% of your income in your 20s you’ll be in a good place for retirement at age 65. Also, use a Roth IRA or a 401K as early as possible.

Thanks for your time

This was my approach to how much money you need to save by age. I hope you liked it and if you did then I recommend you to join my newsletter I post about money management, how to make money online, and how to improve your productivity and mindset.

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