How do you feel about the amount you have set aside for retirement?
Unfortunately, it can be tough to judge how you’re doing.
One of the best ways to help get a sense for where you are is by looking at how you compare to others in your age group.
Your 20s: How Much You Should Have Saved for Retirement
Most 20-somethings don’t even begin drawing a sizable paycheck until 22 or 23, after they’ve graduated from college. And of course, many will continue their education for a few more years or even longer.
Those aren’t the only challenges standing in the way of young investors, though. Most are making an average monthly student loan payment of $351.
Considering the average starting salary for a college graduate is $49,785, that’s a significant chunk of their paycheck every month.
The Good News
This may not paint a very rosy picture, but there is one very good reason to be optimistic: you’re still very young.
Assuming you’re aiming to retire at 65, you have roughly 40 years to save.
However, that doesn’t mean you can take it easy.
You may want to take advantage of compounding interest. If your employer offers a 401(k) or 403(b) plan, you may want to start contributing to it as soon as you can, especially if they’ll match your contributions.
During your 20s, when you may otherwise be unable to set aside significant sums, employee-matched funds can make a huge difference to your savings.
Think about this:
If you’re in your 20s, now is not the time to relax. The more you can put away now, the longer compounding interest will have to grow it.
With a lot of first-time purchases and student loan debt eating away at your income, it’s vital that you contribute as much as possible into your 401(k) or 403(b) plan if you receive employee-match.
Your 30s: How Much You Should Have Saved for Retirement
One rule of thumb you often hear for people in their 30s is that you should have saved an amount equivalent to your income.
That may seem like a little or a lot depending on how early you began putting money into a retirement account.
By the time you’re in your 30s, you should have settled into a career path (although we know that many of you may be transitioning into new and exciting careers).
The hope is that you’ve either you’ve put in enough time at your original company that your paycheck has grown considerably or you were able to leverage your experience into a position at another company, one that comes with greater compensation.
In short, you should be making more money than you were in your 20s.
Even if all you did was maintained the percentage of your paycheck that you set aside, these developments should leave you with that annual-income amount.
Unfortunately, most people in their 30s only have $45,000 saved for retirement.
The Bad News
Of course, if you’re like many people in their 30s, the past decade or so has been eventful. You may still be paying off a wedding (you may even still be paying off the ring). Your family may entail one or two new additions, as well.
This means more and more of your paycheck is spoken for before you can start using it to fund your retirement.
Again, if you’re not already contributing the maximum to your 401(k), now’s the time to start.
Think about this:
If your income hasn’t grown to the point that you’ve been able to save one-year’s salary, that must become your priority. Even if you have a family now, you may want to work on your budget until you’re contributing the maximum amount to your retirement account.
Your 40s: How Much You Should Have Saved for Retirement
Some experts say that by the time you hit your 40s, you should have saved three times your salary for your retirement.
On top of that, you should be done (or nearly done) paying off your student loans.
While the days of day care may be over, older kids cost more. You may have even purchased a bigger house as your family grew, too, meaning that mortgage payment did, as well.
It’s for these reasons and many more that your 40s can actually be harder than your 20s for saving money.
The average 40-something has $81,347 set aside for retirement. However, the average salary for this age group is right around $50,000, which means most people are falling short – by a lot – of the 3x number we quoted above.
Think about this:
You’re probably about 20 years from retirement at this point. While your 50s should give you a little more room in your budget, you need to make every effort right now to set aside as much as possible and hit that 3x number.
Your 50s: How Much You Should Have Saved for Retirement
By the time you reach 50, some experts recommend having five times your salary saved for your retirement. Some say more, some say less.
Where do you stand?
If we go by the sources we used in the last section, you’re most likely woefully short of that amount. The average American in this age group has only saved $144,204.
The good news is that your kids are probably going to college during this decade if they haven’t already. After four years, they will most likely be completely – or nearly – independent of your income, too.
If/when that’s the case, you should consider taking the money you were spending on them and put it into your retirement fund.
Now is not the time to splurge on a fancy sports car or some other midlife indulgence. Unless you’re at 6x your income, you still have a lot of work to do
You may even want to think about downsizing.
The profits from the sale of your home can go into your retirement, plus you’ll most likely save a large sum on your monthly utility bill, too.
Again, that’s more money for your retirement.
If you’re really behind on your retirement saving, then think about delaying retirement. No one says you have to retire at 65. In fact, your social security benefits will increase if you wait to retire until after your full retirement age. Part-time work counts too.
Think about this:
When you’re no longer devoting such a large sum of your budget to your children, it can be extremely tempting to spend that money on something you’ve always wanted (or even something that only recently caught your eye).
However, unless you already have six-times your yearly income saved, you need to keep focused or even consider pushing back retirement.
Where Do You Stand?
Compared to everyone else in your age group, where do your retirement savings stack up?
If you’re like a lot of people, you have room for improvement.
And that’s okay.
It’s never been easier to get back on track.
Once you’ve committed, getting started is easy. Stash is one app for all your investment and saving needs.
Want to learn more about what you expect to have saved by retirement? Check out our retirement calculator.