Your Ultimate Guide to Retirement Savings Goals

Ever wonder how much you should have saved by age 30, 40, or even 50? The truth is, there’s no one-size-fits-all answer—it really depends on your personal situation. But if you’re thinking about your retirement goals and consider things like living expenses, how much you’re saving, and potential returns, we can get a rough idea of where you should be financially at different stages of life.

Why does saving matter, and why should you care?

Saving for retirement doesn’t just happen on its own. It takes planning, discipline, and sticking to it over time. Right now, you’re likely earning money through your job, but there may come a day when that’s no longer possible. That’s why building a financial cushion is so important—you’ll need something to rely on when you can’t work anymore. At SmarterWellth, we suggest easing your anxiety about long-term goals by starting small and starting now. Every little bit helps!

Let’s talk about the magic of compound interest.

So, what is compound interest? Simply put, it’s when your money makes money. Imagine you have a savings account. You put money in, and the bank pays you a little bit of interest over time—let’s say monthly. When that interest gets added to your balance, you start earning interest on that larger amount, and the process repeats. That’s compound interest in action! The bigger the balance, the more your money grows without you having to lift a finger. It’s no wonder people call it “the eighth wonder of the world”!

So How Much Should You Have Saved for Retirement by Age 30?

We will talk about emergency savings later, but when you consider a reasonable amount to shoot for by age 30, in terms of retirement savings, an amount equal to your annual earnings is a good rule of thumb. If you are earning $65,000, then having at least that same amount, $65,000, in a combination of a 401(k) or IRA is suggested. 

It’s perfectly fine to have other financial goals, too. Whether you’re paying off student loans or saving for a house or car, it’s all about balance. Just make sure to put a little money toward each goal, even if one gets more attention than the others for a while. Don’t stress about what you “should” be doing—give yourself some financial grace. One way to help alleviate that stress is to simply start small but stay with it. 

Begin by allocating a percentage of your salary towards your 401(k) retirement plan, if offered, or add a small amount to a Traditional or Roth IRA. The fact that you are putting retirement savings away while making progress in reducing your student debt or other financial goals means that you can allocate more toward retirement savings later. If retirement savings is your primary goal, you’ll want to allocate the maximum allowed and take full advantage of an employer match, if available.

Here are some other suggestions to start saving in your 20s and 30s:

• Start now and start small.
• If you do not have an employer-sponsored retirement plan available, seek the advice of a financial advisor to help you open one or open a Traditional or Roth IRA on your own.
• Make savings a part of your budget by “paying yourself first” before other expenses get in the way.

How Much Should You Have Saved for Retirement by Age 40?

By 40, saving about 3-4 times your household income is a good goal. So, if you and your spouse are making $150,000 together, you’d aim for $450,000 to $600,000 in retirement savings.

The 30s can be a financially tough decade with big expenses like buying a home or raising kids, so it’s important to stay disciplined about saving. Your future self will thank you! During this period, your money is really starting to work for you, thanks to compound interest, so keep it growing with smart investments.

Here are some other suggestions to start saving in your 30s and 40s:

• Monitor your investments in your retirement savings accounts. Know your risk tolerance and the expected rate of return on the investments you choose. Over time, a money market fund will yield a much lower rate of return than an all-stock (equity) fund. Check your investments regularly, or seek the advice of an investment professional if you need help.
• Consider increasing your contributions as your income grows. Remember, in 2024, you can contribute up to $20,000 a year to a qualified retirement plan and $7,500 to an IRA.

• As your income grows, consider opening a brokerage account and investing. Fill up your emergency savings bucket first for peace of mind and financial safety concerns, and then add funds to a prudent investment allocation appropriate for your risk tolerance, investment time horizon, and liquidity needs.
• As your income grows, watch out for “lifestyle creep.” Stick to a budget and monitor your spending habits.

How Much Should You Have Saved for Retirement by Age 50?

By the time you’re 50, aim to have 6-7 times your household income saved. If your household earns $250,000 a year, that means aiming for $1.5 million to $1.75 million in savings. This may sound like a lot, but there’s a reason: retirees typically spend 70-80% of their pre-retirement income. You’ll need that level of savings to maintain your lifestyle without running out of money.

Catching up in your 50s: If you’re not quite where you’d like to be with your savings, don’t worry. It’s never too late to catch up. 

Here’s how:

• Increase your contributions to your retirement plan and after-tax savings.
• Delay retirement if necessary—working a few extra years can give you time to save more.
• Cut back on spending by finding areas to trim, like dining out or vacations, and put those savings toward retirement.
• Monitor your investments regularly to ensure they’re aligned with your long-term goals. If you’re unsure, consider seeking advice from a financial professional.

The Importance of Financial Planning for Your Well-Being

No matter where you are on your financial journey, having a solid financial plan is key. It helps you know where you’re headed and gives you peace of mind. A well-thought-out plan will include your retirement income sources, like pensions and Social Security, and factor in things like inflation, healthcare, and living expenses. With a good plan in place, you’ll know exactly how much you need to save at any age—whether you’re in your 30s, 40s, or 50s—so you can feel confident about your financial future!