How much you should have saved for retirement by age 30 (or any age) is not an easy question to answer.
How much you are able to save depends on a myriad of factors. How much you are willing to save is another story entirely.
It hard to feel motivated to start putting cash away for your old age when you’re barely out of school — but now is the best time to start!
How much should you have saved for retirement by age 30?
The first thing you need to ask yourself is how much you’ll need. Apparently, a 20-year-old could need to have $7 million saved by retirement, but that’s a pretty pessimistic estimate. I’m planning to have at least $2 million, but I’m hoping it will be more.
Saving for retirement in your twenties has significant benefits to your long-term wealth. Your money has decades to compound, so your returns will be significant. You get in to the habit of saving when you’re young, which will make it easier to stick to for the rest of your life. And lastly, retirement savings adds to your bottom line, regardless of what stage you are in life.
At 27, my retirement nest egg is somewhere in the neighbourhood of $20,000. If you add in my TFSA (and I don’t, because I might spend that on other stuff) it’s even higher. I started saving at 25, which is early or late depending who you talk to in the personal finance community. I started slowly, but this year I’m on a retirement-saving bender because the stats about how little people save for their retirement really freak me out.
Very few people save, and those that do aren’t very good at it.
Canadians are actually some of the worst savers in the world. I don’t know how anyone in their 40’s sleeps at night with $10,000 or less in the bank, but they probably have a higher pain tolerance than I do, or considerably less FOMO. I know that if I want to maintain my groovy lifestyle into my 70’s and 80’s — and believe me, I will — I need to make sure I have the funds to do it.
Whatever your lifestyle, you will need to save for retirement in order to afford it. And how much you should have saved for retirement by age 30 is a great first milestone on your lifetime wealth building journey.
Milestones and goals for your retirement savings will let you know you’re on track. I don’t put a lot of thought into my life at age 65 because it’s nearly 40 years away, but age 30 is something I can work with. 30 is soon. So how much should you have saved for retirement by age 30? Word on the street is:
You should have 1x your annual salary saved for retirement by age 30.
That seems doable, right? I’m more or less on track, unless my salary jumps significantly in the next year or two, in which case I would need to have more, but that’s not a bad problem to have 😉
This means if you’re making $30,000 per year, you should strive to have $30,000 saved at age 30.
If you’re making $50,000 per year, then strive to have $50,000 saved.
If you’ve supported yourself through school and entered the workforce late, you might not be able to save 1 year’s salary at thirty. That’s ok! Even if you only get halfway, it’s better than nothing. How much you should have saved for retirement by age 30 depends on your personal circumstances. The most important thing is that you don’t enter your 30’s with nothing saved. Because you’re starting early in your twenties, you will have time to catch up in the years to come, so don’t beat yourself up if you’re a little behind.
If you have more than 1x your annual salary saved, awesome! If you have less, you’ve got some work to do. If you have nothing, you have a lot of work to do.
If you think saving for retirement when you’re in your 20’s is unimportant, I get it. I’m probably the least concerned of all personal finance bloggers about how wealthy I’ll be when I’m old and grey. I don’t like saving for retirement at all, but I do it anyway because I like the idea of being poor even less. Don’t be a self-saboteur and save nothing for retirement in your 20’s, it’s a huge pain in the ass to play catch up every decade thereafter.
How I save for retirement:
Without choice: work deducts 11% of my gross pay and saves it for me. I never see that money, so I never get to spend it. There’s nothing quite like being volun-told to get stuff done.
Automatically: I have transfers set up every payday that direct a small part of my paycheque to my retirement savings accounts. If I didn’t think the above was already enough, I’ve got my own thing going in the same theme: money in, and money out before you can spend a dime. I like locking money in my RRSPs because I can’t get it out to spend it on dresses.
With time: I may add funds to my accounts grudgingly, but I appreciate the interest and dividends that boost the small sum each month. Starting early and saving regularly means my retirement nest egg has decades to grow, and I’m happy to report that, slowly but surely, that’s what I’m already seeing.
How much you should have saved for retirement by age 30 and how much money you will have saved might end up being two different things — and that’s ok. The point is I’m striving towards something, and gaining traction.
How much have you saved for retirement? How much more did you need? How are you getting there?