Stop making excuses for why you “can’t” save $25,000 for retirement by age 30

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, blah blah blah.

Before we continue, I want to point something out. My original suggestion was that you actually have the equivalent of one year’s salary saved for retirement by age 30 — I was low-balling it with the suggestion of $25,000! In other words, I thought I was cutting you guys some slack, not making an unattainable target. Geez! 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. Money After Graduation readers that have been around for awhile already know this is not the case, but for those with doubts let’s do this…

Bridget’s Brief Financial History 

  • I took time off between high school and university during which I did a whole lot of nothing and saved $0.
  • I have lived on my own, paying rent without any parental help since age 18.
  • My cheapest rent was $400/mo ten years ago and it’s steadily increased since then. I now pay $1,200/mo to live in Calgary, Alberta – the 4th most expensive city in Canada.
  • My parents did not pay a single penny towards my university tuition.
  • I will have spent over $75,000 on university tuition, fees, and books by April next year.
  • I paid off over $20,000 in student loans from my Bachelors degree in 22 months.
  • To date, I’ve only worked for 2 full-time years in a professional job in my 20’s.
  • I didn’t start saving for retirement until age 25 (I am now 28).
  • When I left my professional job to go back to school full-time, I forfeited my employer-match on my retirement contributions, a “loss” of over $10,000.

But what’s the most important point about my journey?

I have over $25,000 saved for retirement

(and 2 years to spare!)

So what I really want to say is there will be no whining about your debt load, lack of parental help, cost of housing, lack of years in the workforce, late start on saving, etc etc going forward. You will not get any sympathy from me. This is because sympathy doesn’t make dollars, and I’m assuming you’re here because you want money, not hugs. Let’s get started!

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

Step 1: Stop Whining. 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.

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! Sucks? Too bad, that’s math. 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:

Screen Shot 2014-05-05 at 10.25.03 PM

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.

Maybe now you can see how I made it to the $25,000 mark despite getting a late start. At one point I was dumping over $500/mo into my retirement accounts — talk about playing catch up! Which brings me to my next piece of advice…

Step 3. Get started ASAP! 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.

Screen Shot 2014-05-05 at 10.04.26 PM

Step 4. Manage your assets. If you can score every 1% higher average rate of return, that final number at retirement will soar above a quarter of a million dollars. Is $25,000 really looking like it’s not worth the effort now? 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.

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!