It is getting harder to make money. Records reveal that the average American household has just about $11, 700 put away for their retirement planning. This invariably means that saving money is not a priority for a lot of folks. Paying off student loans, making a down payment for a home, and surviving from one day to the next seem rather more important right now than laboring towards savings goals.
Millennials are some of the worst hits. The average person aged 30 and below have to worry about paying off their student loan debt and starting a family in a world that promises little besides a bleak future. However, it is still important to begin to think about retirement around this period. At 30, the average life expectancy of the average individual includes 30 more years or even less. Thus, how much money you can save in your thirties could determine how well your retirement plans will pan out.
This discussion looks at your expected income by age 30. We analyzed statistics from people within that same age group. Of course, the economic realities of the times affect people differently. Hence, the figures here may not apply exactly to you. Even if you do not have a lot of money saved by age 30, make up your mind to begin saving as soon as possible. This could be the difference between a pleasant retirement and a dreadful one. So, let’s learn how much to have saved by 30 so you can make sure you keep enough money in the bank to be successful!
How Much Money Should Be in Your Retirement Savings by 30?
There are divergent opinions from various financial experts regarding saving for retirement. According to Fidelity Investments, everyone should have an amount equal to their annual salary saved before they get to 30. T. Rowe Price, on the other hand, sets the bar a little lower. They suggest that you have half your annual income saved before 30. This shifts the burden of saving for retirement on to later years. Generally, though, you should be looking to have saved around $47, 000 by age 30.
Granted, the different suggestions are from trusted experts who mean well. However, translating things to reality may not always be straightforward. For example, how much money you have in your retirement savings will most likely depend on, amongst several other factors, your planned retirement age, annual income, and even how friendly the interest rates of your chosen financial institution are.
More so, situations differ from one person to the next. People who do not have to deal with student loans may have a headstart and have more in their retirement accounts than others. With a student loan, you will be unable to start saving as early as others. Additionally, the year’s salary saved in your retirement account might not be worth as much as what someone without additional burdens has to deal with.
It is easy to panic, especially when considering that others have a lot more saved by age 30. Regardless of how you are faring, always bear in mind that how much money you have in your savings account does not get to define you. In any case, we will be looking at some of the tips to consider if you are looking to improve your savings habits.
How Much to Have in an Emergency Fund by 30
You should also be looking to have some money put aside in an emergency fund. An emergency savings fund is supposed to be your go-to place to fund unexpected expenses. Hence, you shouldn’t use your emergency funds to pay student loans or your regular monthly expenses.
Thus, for instance, if there is a medical emergency, your emergency fund should cover it if you do not have health insurance or if your insurance is taking some time to kick in. No one can predict a financial disaster. They are inevitable. Thus, the best thing to do is to prepare for them. Setting up an emergency fund is an excellent way to get in front of any dicey situation, even before they arise.
How much should be in your emergency fund? Basically, it should be as much money as makes you comfortable. Of course, it goes without saying that how much money you will be able to put away for emergencies will depend on what you currently earn. If your annual salary is well below the national average, you will be unable to do so much in terms of savings. However, financial advisors typically advise that you set aside enough funds that will allow you to survive at least 6 months without external support. The idea is that this window gives you enough time to get back on your feet.
Regardless of whether you are putting money away in your retirement savings or not, you cannot do without an emergency fund. It provides a safety net you may not even realize you need.
How to Save in Your 30s
Generally, it is better to start saving as soon as possible. When you start early, you will be able to hit your savings targets much earlier.
Furthermore, the more money you save, the greater the possibility of having a blissful retirement. This is because the average cost of most items keeps climbing. If your spending habits do not mutate to meet the current realities, it might be impossible to meet any savings goal.
Below are our suggestions.
This is easily the surest way to keep yourself accountable and make sure you are always moving towards your savings goal. It is better to task yourself to save money every week or month instead of waiting to put a huge sum into a traditional savings account.
Bear in mind that labor statistics reveal that the average take-home pay for people aged between 25 and 30 is $47 736. Thus, if you are 25, you need to start saving at least $580 per month to be able to have saved $40, 000 when you clock 30. This can appear daunting when you look at it that way. However, if you can start small and increase your savings rate with time, you will discover that you will meet your target headlong.
The first step is to open a savings account, preferably a high-yield savings account. Because of the possibility of a compound interest over time. Then decide on what you get to put away periodically, say weekly or monthly. Then stick to it. If you being your savings today, you will be well on your way to coming up from under any credit card debt with ease.
The only thing better than squirreling money away for your retirement savings is investing. In fact, leaving money in your bank account for the long term will only do so much for you. You are better guaranteed financial security when you convert your savings accounts to investment accounts. It is even more beneficial to start investing before you reach the age of 30 because then you will have a long way to go. You can correct any mishaps along the way and also be able to accumulate interest for a longer period.
There are several investment pathways you can opt for when investing in your thirties. However, the most reliable is investing in the stock market. This is because since you are investing for the long term, short-term fluctuations will not affect you. The stock market favors those who are able to hold their position for the long term. With your retirement savings, you can achieve this.
Investing in stocks is related straightforward. However, you can still choose to employ the financial services of a broker. Such a person will help you pick out the best options for you. They will also be there to guide you when you hit bumps.
As stated earlier, saving alone without investing is not a smart move. So, to pay off your student loans and have a sizeable sum saved up for your retirement, consider investing.
Use a Retirement Account
There are several retirement accounts you can explore if you are keen on saving. The 401(k) is the most popular one. This is mostly sponsored by your employer, and is one of the surest ways of having your annual salary saved before age 30. Here, you will have contributions directly from your salary to the retirement fund. If you use the traditional 401(k), your funds will not be taxed during deposit but taxed upon withdrawal. However, you can use a Roth 401(k) and set up a tax-advantaged retirement account. You will not have to pay taxes while withdrawing your funds.
You could also decide to use an Individual Retirement Account (IRA). You can save your monthly income and any other extra money that you receive within a period. Just like the 401(k), there is the traditional and Roth IRA versions. Both have specific benefits, including allowing for post/pre-tax deductions.
You could also decide to save with a non-retirement account. Brokerage accounts are the most popular to employ here. They provide a protected tax bracket option you can take advantage of.
Prioritize the Most Important Things
The suggestions here are wonderful. However, you are in the best position to determine what is best for you.
Admittedly, having a certain amount of saved income by age 30 is a noble goal. Likewise, paying off your personal loans and any other high-interest debt is also a laudable ambition. However, it is easy to get sucked in by the pressure of being on top of everything. This could easily translate to frustration, and with it, even mental breakdowns.
Hence, the suggestion here is to breathe. Next, consider your situation. If getting an emergency fund with fantastic interest rates is more important to you at this point, then get to it. Similarly, if you’d rather pay off student loans and any other debt, then you should focus on that too. Pay attention to making the best of any situation instead of looking to pull money from any source.
Conclusion: How Much to Have Saved by 30
Benchmarks are important because they help keep your eyes on the goal. When it comes to financial goals, benchmarks are even more crucial. They are not immutable, but they give you a means to gauge how close you are to financial freedom. This article has discussed an important benchmark: how much to save when you get to age 30.
The stipulations here are not cast in stone. Your financial decisions, how much you spend on living expenses, and so much more determine how much you get to save. Hence, do not be overly discouraged if you fail to reach your target. The important thing is to start out and to stick to the process. With diligence, you will be able to settle any student debt hanging over you and have quite a nest egg saved up for retirement.