Stop making excuses for why you can’t save for retirement

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My 30 Financial Milestones You Need To Hit By Age 30 post recently went viral. It was met with a tremendously positive response, but there were a few naysayers in the mix. They seemed to congregate around one point of contention: #5 – Have at least $25,000 saved for retirement by age 30.

Even the Globe & Mail’s Rob Carrick suggested this might be “unrealistic”. He wasn’t alone. Many people insisted that whether or not you can hit this target depends on your circumstances: what you studied in university, how much debt you have, whether you have to support yourself, when you started saving, and so on. While all of these variables can drastically impact your earnings and savings power, I think we sometimes reach too readily for excuses not to save.

When I push my readership for big goals or flex some of my financial muscles, I’m occasionally met with some disgruntled protests that I must have had some easy ride and therefore can’t sympathize with the average saver.  As someone who had a distinct lack of financial advantages — from no parental help with university, to over $20,000 of student loan debt, to renting and supporting myself since age 18 — I know you can achieve more with your finances than you think you can. Diligence and consistency go very far when it comes to money, but you have to put them into action. Sympathy for unfortunate circumstances is great, but sympathy doesn’t make dollars, and I’m assuming you’re here because you want money, not hugs.

Ideally, you actually want to have the equivalent of one year’s salary saved for retirement by age 30. But this can be very difficult, particularly if you spend more than 4 years in school or are in a very high-earning profession. This is why $25,000 is such a great baseline to aim for first, then anything above and beyond is a nice surprise!

How To Save $25,000 For Retirement By Age 30

Step 1: Stop Believing You Can’t. Seriously, stop. Like in my posts on how to save six-figures in seven years or increase your net worth by $25,000 annually, I will not indulge the reasons you can’t (aka. don’t want to) save $25,000 by age 30. The only real reason you might not be able to save $25,000 by age 30 is you are aged 31. No other excuses accepted!

Step 2: Do the math. You will earn between $300,000 and $400,000 (or more!) during your 20’s — and you’re telling me you can’t save less than 10% of that? Boo! If you start at age 20, even if you make a small salary you only need to save 6% of your income to bank $25,000 for retirement by age 30.

In the table below, I outline how a twenty-something with an average salary might save $25,000 for retirement by age 30 by saving 6% of their income:

Screen Shot 2014-05-05 at 9.57.44 PM

chart assumes student is working part time at ages 20 & 21 and thus has a reduced income! Salary increases by 3% annually assuming regular, small raises.

If you don’t start saving at 20 then you have to save more when you do start, but all hope is not lost. If you’re a late bloomer like me and don’t start saving until age 25, you might have to save 10% of your income to reach $25,000.

In the table below, I outline how a twenty-something with an average salary might save $25,000 for retirement by age 30 beginning at age 25 by saving 10% of their income:

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a late bloomer saver doesn’t put anything aside until age 25, at which point they start saving 10% of their income. Salary and salary increases are the same as the previous example.

If you earn more, you can save a smaller percentage of your earnings and still meet the same goal!

Step 3. Get started RIGHT NOW! This is an urgent, please-begin-yesterday matter. Why? Because assuming you can achieve an annual return of at least 5%, every dollar you put away now is worth $7 at retirement 40 years from now.

Screen Shot 2014-05-05 at 10.04.02 PM

So next time you’re complaining that your part-time job is only paying you $10/hr, remind yourself that that is actually $70/hr for your 65-year-old self. Are you seeing why this is so important now? If you manage to bank the full $25,000 by age 30, you’ve actually saved $176,000 for retirement:

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Wow! Worth the struggle if I ever saw it.

Step 4. Manage your assets. One of the easiest ways to meet your long-term savings goals is to invest your money wisely. In the examples above, I used a rate of return of 3% to 5%. If you can score even 1% higher, that final number at retirement will soar above a quarter of a million dollars. The most important components of managing your assets are:

  1. investing for the long-term (this means no crazy day-trading or chasing after “hot” stocks),
  2. diversifying your savings. Try keeping some of your retirement in safe places like cash and bonds, some in moderate risk investments like mutual funds and dividend stocks, and the rest in growth stocks and ETFs and
  3. NEVER WITHDRAWING THE MONEY.

In Canada, you’re allowed to borrow from your RRSP for things like a down-payment on a home or to go back to school. This is a quick way to undo all your hard work! Do not eviscerate your RRSP to buy a home or pay tuition.

Step 5. Cut yourself some slack if you don’t make it. $25,000 is a big number, and there might an unforeseen event that prevents you from meeting that goal. But that doesn’t mean you shouldn’t try. Even if you save only half, you’re still setting yourself up for a great financial future. Remember, any dollar you put away in your 20’s is worth $7 in retirement, so it’s worthwhile to try even if you only manage to get a few in the bank.

Where can you get the money to contribute to your retirement accounts in order to reach the monthly and annual contributions required to reach $25,000 by age 30?

  • work extra hours or at a part-time job
  • ask for a raise
  • take advantage of employer retirement plans or other benefits if available
  • leverage a hobby or skill into something paid, like freelance writing or tutoring
  • sell clothing, books, or electronics that you no longer need
  • skip upgrading your phone/computer every year and hold on to your old technology for 3, 4, or 5+ years
  • cut out a sinful expense that’s hurting your body and your wallet (ie. cigarettes or alcohol)
  • save instead of spend cash windfalls like an inheritance, graduation gift money, or income tax refunds
  • skip an annual vacation
  • put off a major purchase like a car, downpayment on a home, or a wedding for another year (or two!)
  • have 1-2 beers on Friday/Saturday nights instead of 3-4
  • move to a smaller, cheaper apartment or get a roommate
  • maximize rewards points programs so you spend less of your own money on things you need

There’s so many ways! Which is why I know YOU CAN DO THIS! Do it for the $176,000! Do it so you don’t have to eat cat food or live in a box when you’re old. You’re going to be of the wealthy in your old age, there’s luxury cruises and gambling in Vegas waiting for you, so start stashing cash for that fun!

Happy saving!


36 Comments

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  1. “The only thing standing between you and your goal is the bullsh*t story you keep telling yourself as to why you can’t achieve it.”
    ― Jordan Belfort, The Wolf of Wall Street

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  2. I’d agree with your numbers above.

    Granted, I myself have had a much easier go of it than most folks my age with the kind of income I COULD make, but even so, you could make billions but if you spend every penny, you’re no better off than the guy begging on the street corner. You just have fancier digs to live in.

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  3. I won’t make it on this one unless I get a large tax refund next year. Even with me saving $650/month or so for the next 18 months (which I am doing), that only gets me halfway there. If you were a late-bloomer at 25, I’m a late-late bloomer at 28.5. If I had smartened up earlier then sure. What I wouldn’t give for starting two years ago even 🙂

    I guess I am a cautionary tale. But I still don’t think the 25k goal is unreasonable if people are financially savvy right from the get-go. I just started too late, plain and simple. I’d have to put over $1,350 per month to my retirement (assuming not much growth because it’s such a short period of time). That is not gonna happen at this point. But when my debt is gone I will increase my retirement to close to that level.

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    • Bridget (Author)

      $650/mo could over-extend you unless you have a really high income, but even putting $300-$400 or whatever you can afford makes a huge difference. I think the only thing that really frustrates me is when people say “I can’t do that” and so they DON’T DO ANYTHING. I don’t understand why anyone thinks saving $0 is better than $20,000 or $15,000 or even $10,000. It’s always better to have something rather than nothing, even if you can’t hit $25K+

      Getting rid of debt is important! You’ll be able to catch up after it’s paid off because paying off debt creates discipline and you get used to not being able to keep all your money haha

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      • Well, that $650 includes a seriously awesome employee match that vests immediately, so I’m not directly saving all of that myself. My contribution is closer to $300 per month. My income is good, but it’s definitely not “really high”. Yeah, I am not whining about it whatsoever. I messed it up by starting late, but I’m still going to try to get somewhere with the retirement goal.

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        • S.

          I have a similar career trajectory as Alicia. I got my PhD at 27, and did not save for retirement until I was 29. I was unable to save for retirement during my PhD because I wanted to pay off part of my undergraduate student loans while it was interest-free. I also did not contribute for retirement the two years after I graduated because I really wanted those loans gone. I will definitely have $25000 saved about two months after my 31st birthday. So, a bit of a late bloomer, but I’ll get there. I guess I’m also not as worried because I know I will double this amount by the time I am 33.

          Despite my late start, I think I still am one of the lucky ones. I graduated from undergrad in 2006. I know several people who got jobs right after college and lost them in 2008 (I’m from Ontario). They found part-time work at groceries stores, but were unable to save for retirement. Also, there were people who went to law school, business school etc. during the recession. Yes, these were bad decisions, but they may be the reason why a lot of people my age may not have enough saved for retirement.

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  4. Louise

    It SEEMS unattainable when it’s $25,000 total. I was a late bloomer and did lot of stupid things money saving-wise (went from a useless humanities BA to a useless humanities MA, paid for it all myself and worked part-time, married around the same time, have moved across my large-@ss province three times in the last two years, been unemployed twice for several months during that time). At 28, I have an RRSP, TFSA (not maxed-out, but it’s my goal for 2014) and an employer pension. I am super lucky to be where I am, all things considered, but I worked my butt off for it. $100 here of there is easy to save. Just don’t go out for supper and buy stupid things you don’t actually need to live.

    Needs and wants people, needs and wants.

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  5. Love it!

    I feel like anyone who says they can’t do it should really be saying “I choose to spend my money instead of saving it” except in cases like Alicia where she just started too late. I’m sure she’ll be able to make up the difference and have $100,000 saved by age 40 though. 🙂

    Also, Rob Carrick saying that $25,000 for retirement by age 30 isn’t much of a vote of confidence for this generation…isn’t he supposed to be the champion of millennials?

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  6. While $25,000 sounds like a lot I don’t think it’s that unreasonable. I’m 23 and just started saving roughly 6 months ago. My contributions are fairly small as I’m only making $40,000 gross, commuting over 1.5 hours (each way!) to Toronto for work and paying off my $20,000 in student loans. My priority right now is obviously to pay off the remainder of my loans and start making larger contributions.

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  7. Jacquie

    I’ll admit I kinda freaked when I read that about the $25,000. I actually got really grumpy about it. I’m 26 and haven’t put anything aside yet. Not making any excuses…I just haven’t. My debt repayment should be finished up around the end of this year and then I’ll be catching up in a MAJOR WAY until I’m 30. But when I actually looked at the numbers, I realized it IS attainable, and I felt better.

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  8. “The only real reason you might not be able to save $25,000 by age 30 is you are aged 31.” – HAH! Love this. Kick our asses, girl!

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  9. LOL. I’ve always saved at least 10% automatically. The idea that 6% would be like pulling teeth is hilarious to me. I guess $25K seems scary but at least your charts make it far more approachable. Nice work defending your (solid) position.

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  10. Saving money isn’t really that hard. It’s the one saving that makes things hard. Great article!

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  11. My liberal participation in “sinful” activities (drinking) is just me doing my part to provide revenue to the government 😉
    I like how you’ve put it out there in plain and simple tables, with numbers that are achievable for a lot of people. No More Excuses Y’All!!!!
    If you’re in our neck of the woods, employer plans are so good it’s hard to not save that much.

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  12. $25,000 by 30 is very attainable. At 33, my husband and I have almost double that amount saved up in 401k’s. I know it’s not an impressive amount, but we are living on one rather modest income (I left my career to be a stay at home mom in 2008), so I’m proud of it. I saved the entire time I was working, and he has saved from the time he started his career, even when times were really tough. If we can do it, I really think that most working people can. You have to be willing to take a little risk — I regret the time I wasted letting my money sit in bonds instead of mostly stocks.

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  13. Keira

    This post is great. I aim to have 25k + by the time I’m 30. Ideally I’d like to have 30k by 30. If I don’t achieve that, 25kmis a good solid, and more importantly, attainable figure.

    Out of curiosity I’d like to know what Bridget aspires to have by 30 seeing as she’s already hit the 25k milestone we’ll ahead of time. Come on Bridget, share something inspirational with your readers 🙂

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    • Bridget (Author)

      hahaha my retirement contributions are on hold while I’m in school, so I’m only reinvesting interest & dividends. I’m hesitant to make plans without knowing what my income will be at graduation. I’m hoping for at least $50,000.

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  14. Ok I love/hate your graph! I hate it because it makes me think “what the bleeping bleep have I been doing with my money thus far?!” and I love it because now I know I have some time to play catch up. 😛

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    • Bridget (Author)

      HAHAHA. You have tons of time to catch up =) I think graphs break down some of the goals/suggestions enough to make them manageable. The total sum is intimidating but $200-$300/mo is a lot more reasonable and thus a lot less scary. Good luck!

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  15. My friends totally roll their eyes when I start to go into the whole “start saving for retirement NOW” rant. I will definitely have the last laugh when we’re much older and they’re regretting not starting yesterday!

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  16. @WilliamLipovsky

    I had $25,000 when I was probably 16. And no I don’t think I’m special.

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    • Bridget (Author)

      I don’t think I’d even earned $25,000 by the time I was sixteen =\

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      • The only people I knew who made decent teenage money were lifeguards (really high rates in Ontario) and guys who did under the table manual laboring. I filed paper, babysat and served at a banquet hall, lol.

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        • Bridget (Author)

          haha seriously! I folded sweaters for something like $6.50/hr. I never got anywhere near $10,000 let alone $25,000 as a teen.

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  17. I’m so confused why anyone thinks $25k is a hard number to reach…

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  18. I’m not sure where you think it’s reasonable for a 22 y/o to make 35K+ a year. Not with a degree, and certainly not without one.

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    • Bridget (Author)

      $35,000 per year works out to $17.50 per hour. I can’t see how that’s not reasonable. That is a very low starting salary for someone with a Bachelors degree, and absolutely achievable for someone with only a high school education (assuming they graduated at 18, they should already have 4 years of work experience)

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      • K.

        It’s completely unreasonable in this job market. I speak from experience as someone with a bachelor’s degree (2012) and graduate courses, who is unable to find full time employment ANYWHERE. I currently work at a nonprofit doing case management part time (NO possibility of being full time, positions just don’t exist), and nanny part time, meaning I work 6 days of out the week.
        Annual income is maybe close to 19k (and I am 22, but have started saving!), nowhere near your projection. I wish some personal finance blogs really “got it”, what it’s like being trying to find full time work.
        I read multiple PF blogs, and they all usually tout “just work more”, or “get a better paying job” like that is any way possible. I’m tired of reading posts from holier-than-thou writing, it’s super discouraging.

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        • Bridget (Author)

          At 22, I made less than $20,000/yr and if you had told me to save $25,000 by 30 I probably would have considered it impossible.

          The fact that you’re saving now (however small) gives you an edge. It will add up. You don’t know where you’ll be next year or in 5. Maybe your circumstances are bad now, but they could improve.

          That said, the job markets are not uniform everywhere and all PF bloggers can’t write posts to cater to every individual in every geographic location and on every career path. My salary projections and savings suggestion is reasonable for most people, or at least most Canadians which is my primary audience.

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          • liz

            agree…

            I make minimum wage and have the 25k in the bank. I am 24.

            Some of this money was old stocks but most was just living with very very low standard of living, saving every dime

            I have washed dishes, picked corn, wiped butts and mopped floors to get this cash, its what you gotta do if its important to you.

  19. Alex

    I am 27 , I am still getting out of debt actually, I got unlucky with my career path still hasn’t acheive it yet, I got caught up drunk in my car when I was 24 and dumb and finally I am getting all out of this sanction which has cost me over 25 k for everything , so I can finally put some money on my debt and start savings

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    • At 27, you sill have 3 years to make significant progress — and you will! You’ll be surprised what you can accomplish in 3 years.

      Well done getting past your mistakes and taking control of your finances. You will do very well in the coming years!

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  20. Paige

    Great post, the only thing I would disagree with is the benefit of the first time home buyer or the education plans that allow you to take money out of your RRSP. Depending on your income/savings, these can actually be wonderful tax strategies. Personally, I am planning to do my MBA this coming fall (I’ve already saved to pay for it) but before I go back this year I’m planning to dump an extra 10k into my RRSP in order to get the tax break from a high income year, take it back out to pay for my MBA so I avoid bank loans, and pay back to my RRSP over the years where my tuition will give me large tax breaks. In this sense, I’m not actually depleting my RRSP because I’ve dumped money in it that I was never really intending to keep there this year. If anyone has the cash on hand to do this either before school or before buying a house it’s actually a very positive tax strategy.

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