How much money should you have saved by age?
Many Americans are turning their attention toward saving money right now — a time when inflation remains persistent. And, it's a smart time to do so, as interest rates are high, which offers an incentive to put money in high-yield savings accounts, certificates of deposit (CDs) and similar types of interest-bearing accounts.
But what's the ideal amount to save? The U.S. personal savings rate shows what Americans are saving after accounting for taxes and spending. It dropped through much of 2022, but the personal savings rate has generally been on an upswing in the time since, with the average American saving about 3.8% of their disposable income as of October 2023, according to the Bureau of Economic Analysis.
It's worth noting, though, that these calculations include retirement savings — and the common rule of thumb is to save 15% of your gross income annually for retirement. Given that rule, it makes sense to aim higher than the average personal savings rate.
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Separating retirement savings from regular savings
It can be helpful to separate retirement savings goals from regular savings goals, as there are risks to commingling funds. You may be putting 15% of your income away each year into your 401(k), for example, but you also may want to put away money every month for goals like buying a car, taking a vacation, buying a house, etc.
That way, you don't have to dip into retirement savings early. Liquid savings can also be a good way to avoid unnecessary credit card fees.
"Let's say you have a $1,000 expense come up. If you put it on a credit card with an APR of 20%, and only make minimum payments, by the time you pay it off, you'd have spent around $1,560 on this expense, way more than the original $1,000," says Laura Redfern, certified financial planner, certified financial transitionist at Shadowridge Asset Management, LLC.
"If you take money out of your retirement account early—in most cases, age 59.5—you may face taxes and penalties in addition to the amount you take out. If you are in a 25% tax bracket, plus the 10% early withdrawal penalty, you'd end up spending around $1,538 on this $1,000 expense. And that's not even considering the opportunity loss, assuming your retirement account is invested for long-term growth," she adds.
Yet approximately 4 in 10 Americans don't even have $1,000 in an emergency fund, according to Primerica.
And ideally, you would save significantly more than that. How much exactly? It's tough to pinpoint a number, as much depends on factors such as your income, risk tolerance and life circumstances. But there are a few ways to think about savings as you age, which can help you set a specific goal.
How much money should you have saved by age?
Savings at different ages can vary from person to person. A single person in a low-cost state likely needs to save much less than someone with two kids in a high-cost state, for instance. And someone who wants to travel frequently, for example, might have a different savings goal than someone trying to pay for a master's degree.
"Savings should always be tied to a goal, 100% of the time. The goal should be SMART – specific, measurable, actionable, realistic, and timebound," says Doug Ornstein, CFA, senior integrated solutions manager, TIAA Wealth Management.
By creating timebound goals, e.g., save for a downpayment within five years, you can more easily see how much money you need to save by a given age. That said, if you're unsure where to start in terms of goal-setting or want some sort of benchmark, consider the following suggestions for savings by age:
By age 30
When you turn 30, or in your 30s already, you likely want to establish a safety net for yourself that you can then build from.
"A good first savings goal is an emergency fund. Having one of these enables you to save for other goals without going into debt when life happens," says Ornstein. "Establishing 3-6 months of living expenses, which of course varies based on your life situation, is a good place to start."
By age 40
Your 30s might still be a time of figuring out your finances. But ideally by the time you're 40, you've used the preceding decade to focus "on paying bills and living within your means," says Redfern.
If you have that figured out by the time you're 40, you also might have saved enough to buy a home. That can also come with saving more in your emergency fund, as your monthly expenses might go up when factoring in mortgage payments, taxes, HOA fees, etc.
The average age of first-time homebuyers jumped from 33 to 36 last year, according to the National Association of Realtors (NAR). And the median price of a home nationally is $402,600, NAR says.
While many first-time homebuyers put down less than 20%, if you want to avoid private mortgage insurance and have a more manageable monthly payment, that could mean you'd need to save $80,520. However, that amount can differ significantly by location and personal preferences.
By age 50
During your 40s, leading up to age 50, your "main focus changes gears to building assets, including liquid savings," says Redfern.
She recommends opening a savings account for each goal, such as travel, a new home, a new car, etc., and know the specifics of these goals so you can properly save for it.
"Don't just say 'for the Europe trip. Plan out what you will do, where you will stay, how you want to travel, and how much it will cost. Make that cost your savings goal," says Redfern.
And if you already accomplished goals like buying your first home, you might turn toward loftier ones, like buying a vacation house. Keep in mind, however, that you need to plan ahead to reach that goal.
"Say you want to buy a vacation home by age 50, and you want to set a goal of $100K for the down payment. If you're 40 years old, you've got a 10-year timeframe to save $100K. You'll need to save about $7,500 per year if you can find yourself a 6% return and are comfortable with the risk on that type of investment and time horizon," says Ornstein.
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By age 60
Your 50s, leading up to age 60, is a good time to "turn up the volume and refocus on retirement savings," says Redfern.
Once you turn 50, you can start making larger deposits, known as catch-up contributions, to retirement accounts. However, you shouldn't ignore your liquid savings, as you want to make sure you have enough cushion to endure unexpected hardships.
Considering your expenses have likely grown, "reevaluate your emergency savings to ensure it is adequate," says Redfern.
"You could also reevaluate your savings through the lens of your insurance deductibles. Is there enough to pay your health, car, and homeowners deductibles, in addition to your monthly expenses?" she adds.
By age 70
As you turn 70, you might have recently retired or be close to doing so. In that case, you might want to save enough to pay off debts so you have lower monthly expenses.
"Paying off the mortgage is a key goal" in the decade leading up to age 70, says Redfern.
Turning to savings vehicles like high-yield savings accounts and CDs can be helpful as you age so that you don't have to navigate market swings. If you're trying to pay off your house within a year, for example, you likely wouldn't want to put those savings into stocks in case they drop by the time you're ready to make your last mortgage payment.
"The biggest risk with most high-quality investments is timing risk — that is, the risk that you need/want to sell your investment at a bad time," says Ornstein.
Further considerations
Past age 70, you might turn your attention toward your legacy and save enough for potential medical bills and final expenses, says Redfern. "Even if you have great life insurance, your heirs will likely need some liquid cash to pay for things while your estate is being settled, so plan mindfully."
But no matter what age you are, remember that savings targets can vary among different people.
For example, "if your job is pretty stable with predictable raises, you might be okay saving less than someone who works in an industry with high turnover and unpredictable paychecks," says Redfern.
Others, however, might prefer to save more than the average person to meet lofty spending aspirations. Do some reflection to figure out what makes sense for you and your family in terms of how much to save.
"How do your priorities align with your resources? Is that a nice new car, starting a business, or paying for your kids' college education? Maybe you want all three. It has to bring you joy to save for it," says Ornstein.
That said, just because you want something, that doesn't mean you can automatically reach it or that you'll be able to handle spending cuts enough to get there. "It is important to be realistic about what you can afford to save, do some level-setting, and find a financial advisor or tool to help you invest," adds Ornstein.
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