How Much Should You Save for Retirement in Your 30s?
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Salma Hossein
- . February 20, 2023
- . Update: February 21, 2023 1:47 am
If you’re having a conversation with your financial professional or reviewing your retirement accounts by yourself, it’s a good idea to ask how much money you should have saved by 30.
During your 20s, you might not have saved much for retirement. You might have been focused on finishing your degree, starting your career, paying down debt, or saving for a home during this time.
Maybe you got some sound advice and a good job at a young age, allowing you to contribute to your 401(k) through work and your Roth IRA on your own.
If you’re approaching your tenth birthday, you might be wondering if you’re on track — or if you’re off track and what you need to do to catch up. You might also wonder how to stay the course or ramp up your savings. You may be paying off a mortgage, raising children, or paying off student debt in your 30s, making it difficult to save for retirement.
In your 30s, you can strategize around saving for retirement in three ways:
- The following are some common rules of thumb.
- Comparing your progress to others can be harmful or beneficial.
- In your 30s, there are several strategies you can use to increase your retirement savings.
Let’s start by discussing popular savings guidelines.
- Saving for retirement in your 30s: common rules of thumb
While researching how much you should have saved for your retirement in your 30s, you might come across the following guidelines:
By age 30, you will earn about 1/2 to 1 1/2 times your income.
By age 35, you should earn 1 to 2 times your income.
Here are two examples of where these guidelines could lead.
Amount of income: $40,000.
Savings for retirement by age 30: $20,000 to $60,000
- By the age of 35, you should have saved between $40,000 and $80,000 for retirement
Income: $80,000 per year
The average retirement savings by age 30 is $40,000 to $120,000
Savings for retirement by age 35: $80,000 to $160,000
Because they assume you will be able to live on a similar or slightly lower income in retirement, the amounts are based on your income. A guideline based on income can be more useful than an absolute dollar figure, which doesn’t consider your standard of living or regional costs.
It depends on your salary, your debt load, and the cost of living where your early career opportunity presents itself that these goals are realistic, says Russell Jacobs, founder of Jacobs, Coolidge & Company on St. Simons Island, Georgia. By the age of 30 or 35, you should be able to reach these levels of savings in many places.
“How much one can save is a function of all of those things and what one chooses to spend on lifestyle purchases, such as clothes, Starbucks, dining out, vacations, or fancy cars,” Jacobs said. If you assess your situation, it’s best to save at least 10 percent and push for 20 percent if you can.”
If you enter the workforce in your 20s or didn’t start saving immediately, a lower goal might be more realistic, unless you have a lot of disposable income. (Related: Saving in your 20s … do the math.)
Even if you are starting from nothing in your 30s, you still have plenty of time. Assuming a traditional retirement age in your mid-60s (which is also what the common rules of thumb assume), you still have another three decades to save principal and earn investment returns.
You can check your retirement readiness with MassMutual’s retirement calculator.
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Comparisons with others and progress toward retirement
Do you remember reading an interview with an already multimillionaire 35-year-old who felt completely inadequate afterward because he or she was already work-optional? It’s hard not to, but most of us won’t be able to achieve that kind of wealth at such a young age. Their extraordinariness is why such stories are published, after all.
“It is not a good idea to compare yourself to other people’s progress unless they are simply discussing what percentage of your income they are saving,” said John Bergquist, a South Jordan financial advisor. To reach goals, each person needs to save a different amount of money because their incomes are likely to be at a different level.
Set your own goals based on how you want to live now and in the future, how much of your income you can realistically save, and how aggressive you’re comfortable being with your asset allocation.
Another reason to avoid comparing your progress to others’: A lot of 30-somethings aren’t saving nearly enough for retirement. If you compare yourself to them, you may feel like you’re doing well – when in fact, you’re not.
According to Fidelity’s analysis of 16.4 million workplace retirement plan participants, the average 30- to 39-year-old contributed 8 percent and had an account balance of $38,400.
A Vanguard study of 2019 account balances found that Vanguard-defined contribution plan participants ages 25 to 34 had an average account balance of $26,839 and a median account balance of $10,402. There were 12 percent of participants of all ages who contributed a maximum of $19,000. The average contribution rate, including employer contributions, was 10 percent, while the median contribution rate was 10.7 percent.
They may have other retirement accounts, such as those with previous employers and IRAs. If they do, their nest egg is below the goal you should aim for.
In your 30s, here are some ways to increase your retirement savings
- Considering retirement as a long-term endeavor often pays off overall. You should also consider how to adjust should there be any twists or turns in the road as well as how to get to where you want to be. (Need a financial professional? Find one here.) Many people turn to financial professionals to help them understand what options are available.
- In addition, if you want to make progress toward your retirement goals, you may be able to make small tactical changes.
- Do you wait until tax time to contribute to your IRA? Set up automatic contributions instead. Your money will grow over time and you won’t feel the hit of making a large contribution all at once. Select investment options for those contributions, since your savings won’t grow enough to meet your retirement goals unless they’re invested.
- Contribute enough to your workplace retirement account, typically a 401(k), to receive the full employer match.
- Looking for a new job with better workplace benefits? It may be worthwhile to consider changing jobs. Some employers not only match employees’ contributions but also contribute regardless.
- You can increase your automatic contributions to your 401(k). Let’s say you currently contribute 5 percent of your salary. You will save 15 percent of your salary after 10 years if you increase your savings rate by 1 percent per year, and with such a slow and steady increase you won’t even notice it.
- Aside from increasing your earnings, self-employment income can also open up other business opportunities.
- Don’t touch your retirement savings. Put your money in a high-interest savings account or CD instead of tapping it for a down payment, an emergency fund, or anything else.
If you haven’t saved a certain amount of your income by the age of 35 or 30, don’t feel bad about it. You have a better chance of retiring comfortably and on time if you consistently save for retirement, and strive to increase the percentage of your income you save.
