How Much Should I Have Saved By 30?
Not sure how much money you should have saved or invested by the time you reach 30? This post dives into benchmarks to help you establish a strong financial future that you can rely on.
post-template-default,single,single-post,postid-19934,single-format-standard,bridge-core-2.6.7,qode-page-transition-enabled,ajax_fade,page_not_loaded,,qode-title-hidden,qode-theme-ver-25.2,qode-theme-bridge,wpb-js-composer js-comp-ver-6.6.0,vc_responsive,elementor-default,elementor-kit-8
couple in their 30s looking at their savings and budget plan

How Much Should I Have Saved By 30?

Want to know if you’re on par with the rest of the people your age? There are some popular benchmarks that will tell you if you’re moving in the right direction when trying to understand how much money you should have saved by 30. Remember, it’s a target, not a must have!

As you explore the opportunities offered by your 20s, retirement planning is probably not at the front of your mind. Your focus is more likely on forging a career rather than thinking about what to do when it’s over.

And with all the costs of building an independent life, from setting up a home to maybe paying down student loans, there are already heavy demands on your finances. Putting scarce cash to one side for a distant future can seem like a priority for another day,

But it’s an undeniable truth that the sooner you start saving for your retirement, the less you’ll need to save each month, and the more comfortable your later years will be. Every little bit you can save now will bring great rewards in the future, thanks to the power of compound interest. Just as importantly, every year you delay means you’ll have to invest more to play catch-up later, and the longer you leave it, the harder it gets.

So while retirement might seem a long way off, and there’s definitely plenty of living to do in the meantime, starting to save at least a little is one of the best financial moves a twenty-something can make. But how much should you aim to put aside? An important way of planning your savings is to use benchmarks to track your progress, and one of the earliest ones is how much to save before you hit the milestone age of 30.


Setting Benchmarks: Money Saved by the Age of 30 

It’s likely to be many decades before you retire, and such long-term plans can easily drift off course when it seems there’s so much time to play with. Breaking your progress down into benchmarks not only puts your plans on a more graspable timescale, but it also helps you to see whether you’re on track or if you need to take action before things go too far out of line.

A useful goal is to have a significant amount of savings invested by the age of 30. How much should this be? One common benchmark is to have saved a full year’s salary by that age, with the figure based on your likely income at 30 rather than your current pay. The average income of a 30-year-old in the US is $48,000, which to many people can seem an intimidatingly large amount.

However, it’s not a target that’s realistic for everyone. Extended college years, a low-paid first job, or even a brief spell of early-career unemployment can make such a large figure extremely hard to reach, compared to someone who earns good pay straight out of high school.

Because of this, another popular and less stringent target is to save half a year’s income by 30, ramping up your savings rate from then on to hit the annual pay target by 35. This makes your first few years of saving easier, and also takes into account that most people will be able to save more as time goes on and their career progresses.


The Benefits of Savings Benchmarks 

Benchmarks aren’t there to provide a hard-and-fast figure for everyone. Each person’s finances are different, and the ideal amount of money to save by 30 will also be different for each individual. 

The real benefit of benchmarks is that they provide a relatively near-term goal to aim for, along with a way of measuring your progress. They’re not a substitute for full financial planning, but are a great way of adding some structure to your savings in the earlier years when your planning needs aren’t perhaps too complex.

As well as setting a savings target for 30, it’s also helpful to set provisional benchmarks for later years. Common ones include:

  • 3-4x  your annual salary by 45
  • 6x by 55
  • 10x times by your retirement at 65.

These targets will help you get a feel for your overall plan, but are only rough ideas and should be revised as they get closer.

And it’s always important to remember that the real success of retirement saving is found in starting early and keeping to a regular savings habit, even if the amounts are smaller than you’d ideally like. If you don’t hit your age-30 goal, it’s not a judgment on your budgeting skills or career progress. Instead, treat it as an opportunity to get things back on course while there’s still plenty of time ahead, rather than realizing you’re way behind your target with only a few years to go.


How to Set Realistic Goals 

When deciding on your benchmarks, consider how much you’re likely to be earning by the time you retire, using today’s average figures for your career. 

Next, decide how much retirement income you’d need to maintain a similarly comfortable lifestyle. There are many retirement calculators available online which you can use as a guide, showing you how much your savings can grow and how much income they could eventually provide.

But whatever target you settle on, it needs to be realistically achievable. Setting your benchmark too high can be discouraging, leading you to save too little because the whole task seems too daunting. On the other hand, setting the benchmark too low can easily give you a false sense of security, making you think you’re on course when in fact you’re saving too little for a comfortable later life.


How Much Can You Save Each Month? 

A good way to decide on your monthly savings figure is by using the 50-30-20 rule as a guide. When setting your budget, allow for 50% of your income to pay for necessities such as rent, food, transport, energy bills, and so on. The next 30% can be used for discretionary spending on entertainment, treats, vacations, and the other ‘nice to haves’ that improve your quality of life.

Under this system, the last 20% of your monthly income should be used for a combination of paying down debt and paying into savings. The split between debt and savings depends on your situation, but ideally your annual savings should amount to 10-15% of your income to give your investments some real momentum.


Calculating Your Savings 

After working out how much you can realistically save each month, use an online savings calculator to find out what this could mean for your retirement planning. Most calculators will take your age, your current savings, your monthly savings amount, and your likely retirement age to give you a rough estimate of what a typical interest return could bring you.

If the figures provide a result that looks reasonable, then you’re good to go. But if it seems your savings will be too low, try experimenting with the savings amount each month to see what you could save in an ideal world, and see if any economies or other budgeting methods could help you get to that level.

But once again, remember that it’s always better to save something, even if it’s not as high as the ideal figure. When you’re in your twenties your income is likely to keep growing far into the future, and you can increase your savings later on to expand on the base you’re building now.


Tips for Savings and Investment Success 

Putting aside a monthly sum into a regular savings account is a good start, but retirement saving can be made much more effective by following a few straightforward guidelines. As with all investment, professional advice is invaluable for making the most of your own situation, but here are some essential savings tips to bear in mind.


1. Treat Savings as an Expense 

Treat your savings as a recurring expense, and include it in your monthly budget. Make setting aside a specific amount as important as your rent or mortgage, and not an afterthought using up whatever spare cash you have left at the end of the month.


2. Make Savings Automatic 

You’re much more likely to stick to your savings plan if you put it on autopilot. Set up an automatic transfer from your checking account to your savings, happening every month just after your pay arrives.

Even better, ask if your savings can be deducted at source, with payroll sending a certain amount of your salary straight to your 401(k) or other vehicle. If you never see the money in your account, it makes it much easier to continue saving.


3. Increase Savings in Line with Pay 

Whenever you receive a raise, increase your savings amount by a similar proportion straight away. You won’t miss the extra money if you’ve never had it available to spend.


4. Think Long Term, Think Stocks 

When saving before the age of 30, there’s plenty of time for your investments to bear fruit. Don’t worry about short-term variations, but focus on how your money will work for you over the next few decades. Many experts recommend placing a high proportion of your early savings into stocks, as historically these can show an annual return of around 10% when taken over the span of a retirement plan.

But there’s no need to become a wheeler-dealer in individual shares. Mutual funds and other vehicles linked to the stock market provide similar returns without the need for micro-management, and make an important part of a wider portfolio. However, as always, consider individual advice from a professional before making any major investment decisions.


5. Make the Most of Tax Breaks 

Also consider taking expert advice about any tax breaks you can take advantage of. A 401(k) is a great way of making structured savings, as the payments are taken out of your salary automatically and you’re only taxed on what remains. What’s more, a 401(k) allows your savings to grow without being taxed until you withdraw, giving compound interest a powerful boost.

An investment plan known as a Roth IRA is another way of saving that’s more tax-efficient than a basic savings account. Although you won’t receive a tax break on the money you pay in, the returns will be tax free when you withdraw at retirement, potentially saving many thousands.

Both the 401(k) and the Roth IRA have a limit on annual contributions to receive the full benefits, and a financial advisor can help you make the most of them both.


6. Don’t Forget Employer Contributions 

If you’re saving into a 401(k), make full use of employer contributions if they’re available. Depending on the plan and the amount you save, your employer could match your contributions dollar for dollar for up to 6% of your annual earnings. Every little extra you can contribute under this system could effectively be doubled, making a huge difference to your overall savings.


7. Keep Some Savings Easily Available 

It’s always important to keep an emergency fund available so you don’t need to meet an unexpected expense by borrowing. However, there’s no reason you can’t make your emergency fund work toward your retirement too.

Keep a portion of your savings in an easy-access account which you can draw on if absolutely necessary. It won’t earn you as much interest as in a longer-term account, but it’s better to have it available so you don’t need to use debt in an emergency, or even worse, take the tax hit of withdrawing from your retirement fund.


8. Balance Savings with Debt Payments 

There’s little point pouring money into a savings account if you’re also carrying a high level of expensive credit card debt. Consider diverting some of your savings into clearing this debt, reducing the interest drain on your finances. However, it’s important to be disciplined and genuinely clear the debt, and then switch the monthly payments back to your savings plan.

Also remember that clearing lower-cost debt such as student loans isn’t as high a priority as keeping up with your retirement savings. Try and strike a good balance between reducing interest costs today and building up interest earnings for the future.

Everyone’s financial situation is different, but keeping an eye on the future is important for everybody. Saving for retirement is a long-term plan which can look daunting at the beginning, but the important thing is to make a start as early as possible. 

Setting a benchmark for how much money you should have saved by the age of 30 is a great way to take a structured approach to retirement savings, and is a vital step on the road to a financially comfortable future.