How Much Money To Save For Retirement

Savings by Age: How Much to Save in Your 20s, 30s, 40s, and Beyond

June 24, 2021

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No matter what stage of life you're in, one thing will always remain the same: You're never too young — or too old — to save money.

Using your age can be a helpful way to calculate your potential savings and estimate how much money you should save for various life events. Just remember: Don't get discouraged if you haven't started yet, need to hit pause, or fall behind. You can always get back on track.

If you're wondering, "How much should I have saved?" now is the time to flip your mindset. Think, "How much could I save?" Read on to see just how much your savings today can turn into down the road.

1. So, how much money should you have saved?
2. Adventure Awaits: Savings for Retirement by Age
3. Rainy Day Fund: Savings for Emergencies by Age
4. Saving for a Wedding, Vacation, Puppy and More
5. Smart tools and strategies for savers of all ages

So, how much money should you have saved?

Fast Answer:

The amount of money you should save is unique to your lifestyle.
You can reach savings goals by creating specific target amounts and dates.
Find extra money to save by cutting back spending and/or picking up a side gig.

First things first: There isn't a one-size-fits-all number. It's important your savings — and savings goals — connect to your lifestyle. That includes everything from your income and the way you like to shop, to where you live, if you have a car, if you're raising kids, pay rent or have a mortgage, and more. Everyone has their own magic number based on their budget.

You can find your magic number by creating specific savings goals. For example, you want to save for a treadmill that costs $1,000 to complete your home workout routine within the next six months. Being specific about your goals — and when you hope to accomplish them — will give you a framework for how much you need and how long it could take you to get there. Smart savings tools like buckets let you easily set goals, organize your savings and keep track of your priorities.

Remember, the key to saving for goals that are quickly approaching and those far off isn't putting away massive amounts of money at a time. (Although a windfall of cash, like a tax return, can help you from time to time). It's really all about finding a savings amount that works for you — and staying consistent.

Expert tip: Finding extra money can be possible. Start by looking at your weekly or monthly spending. You might find areas you can cut down on expenses to free up cash for saving. Even if it's just a few bucks a week, that's a win! Or, you might realize increasing your income is a better option. You could consider a side gig or explore ways to make money online.

Savings for Retirement By Age

Fast Answer:

A general rule of thumb is to have one times your income saved by age 30, three times by 40, and so on. See chart below.
The sooner you start saving for retirement, the longer you'll have to take advantage of the power of compound interest.
Aim to save 5% to 15% of your income for retirement — or start with a percentage that's manageable for your budget and increase by 1% each year until you reach 15%.

The thought of saving a couple million dollars by your 60s or 70s can sound daunting, we know. That's where breaking up your retirement savings with age-based benchmarks may help. By looking at your savings in 10-year increments, it's easier to plan financially and put actionable savings steps in place.

One popular age-based savings recommendation is that you should aim to save one times your salary by age 30 and increase your savings by your annual salary every five years.

By Age...	You Should Aim to Save...
30	1 x your income
40	3 x your income
50	5 x your income
60	7 x your income
70	9 x your income
80	11 x your income

Keep in mind the above is more of a guide than a strict plan. The amount you should save for retirement should be based upon factors including:

your income
your planned retirement age
the kind of lifestyle you want to have in retirement

For example, if you want to retire at age 62 and travel the world, you might need a bigger retirement account than if you plan to retire at 70.

So, how do you begin to aim for these goals? You could start by investing 5% to 15% per paycheck in a tax-advantaged retirement account until retirement.

The Power of Retirement Investing

Your retirement savings rate can have a big impact on your total return. See below how much could be stashed away with consistent saving. The following example is based on the U.S. median household annual income of $68,703 (according to 2019 U.S. Census Bureau data) and assumes an average annual return of 6%.

Starting at Age	Annual Retirement Savings Rate	By Age 65 You'd Have...
25	5%	$531,607
	10%	$1,063,261
	15%	$1,594,896
35	5%	$271,565
	10%	$543,153
	15%	$814,732
45	5%	$126,358
	10%	$252,728
	15%	$379,093

Dedicating 5% to 15% of your pre-tax income to retirement isn't always possible. You may be starting a new career, paying back student loans, or have other financial obligations and aren't able to save that much of your salary all at once. And that's okay, because saving for retirement isn't all or nothing. If that is the case, start with a percentage you're comfortable with and increase your savings rate gradually by 1% each year until you reach the 15% mark. If you're getting a 1% annual raise at the same time, you won't even miss the extra money from your paychecks.

Don't panic if you're currently paying back loans or other debts. If you have room to save for retirement at the same time, that's great — aim to put away what you can while sticking to your loan repayment schedule. Once you've paid off a debt (like a car loan, student payments, credit card debt, etc.) consider transferring that monthly payment amount toward retirement instead.

No matter your age, tax-advantaged savings and investment accounts, such 401(k)s and Roth or traditional IRAs (Individual Retirement Account), could be used to your advantage at any point in time.

If you've been saving for a while, make sure to give your retirement accounts regular checkups to see if you're on track for your goals.

Expert Tip: You can increase your contributions to your 401(k) by saving enough to qualify for your employer's full match (if one is available). For example, if you set aside 5% of your annual paycheck in your 401(k) and your employer matches 100% of your contributions up to 5%, the annual contribution to your retirement fund will be 10% of your yearly salary. Employer-sponsored retirement programs differ, so check with your employer for eligibility.

Feeling behind? Consider a "catch-up contribution."

If financial constraints or other priorities keep you from saving for retirement until later in life, you can consider taking advantage of what's called a "catch-up contribution." That is when retirement plans let you make an extra yearly contribution to your tax-advantaged retirement account once you hit age 50. (The amount allowed is determined by the IRS.)

When saving for retirement, automate monthly transfers from your checking account to a savings account or an IRA (if it makes sense tax-wise) for a hassle-free way to watch your retirement savings grow. Be sure to consult your tax professional to see if it makes sense for you. And remember to check in on your savings (ideally, at least once a year) to see how your efforts are paying off.

Finally, don't forget about Social Security, which you may qualify for starting at age 62. These monthly payments, as well as another retirement account, like an IRA can be used to supplement your retirement savings.

Open an IRA Account Today

Savings for Emergencies by Age

Fast Answer:

Rather than using your age as a guide to determine how much you should have saved for emergencies, you could start with the amount you spend each month on expenses.
A popular mindset is that emergency savings account should ideally hold three to six months' worth of expenses in easy-to-access cash.
To keep your emergency savings accessible, consider an online savings account (not a CD or investment account).

It's inevitable: Life throws you financial curveballs.

That's when your emergency fund can save the day.

An emergency fund is cash you set aside in a savings account only for unexpected expenses. If your dog swallows a chew toy and needs a trip to the vet, for example, or your car breaks down and needs a new transmission, the funds in your emergency account can pay for those just-in-case moments.

Emergency Funds: It's all about Your Monthly Spending

The ideal size of your emergency fund will likely fluctuate throughout your life based upon your monthly expenses. Rule of thumb? Aim to have at least three to six months' worth of expenses set aside.

We know this can feel impossible, especially if you're just starting out. Remember, you don't have to build an emergency fund overnight. Instead, focus on consistently putting away what you can afford. It's perfectly okay to start with a smaller savings goal, whether it's one month of expenses, a $1,000, $100, or even $10. Strategies like microsaving can help you find safe-to-save money you might've not realized you had.

To figure out how much you should have saved for emergencies, simply multiple the amount of money you spend each month on expenses by either 3 or 6 months to get your target goal amount. See example below.

If you spend…

Monthly spending examples:	3 months of emergency savings	6 months of emergency savings
$1,190	$3,570	$7,140
$2,380	$7,140	$14,280
$3,120	$9,360	$18,720
$4,760	$14,282	$28,560
$6,240	$18,722	$37,440
$7,140	$21,420	$42,840
$9,360	$28,080	$56,160

The chart above is based on 2019 Consumer Expenditure Survey data from the United States Bureau of Labor Statistics. Note that these expenditures include both essential expenses (like rent or mortgage, groceries, insurance payments and education) and nonessential purchases (like entertainment and clothing).

Keep in mind: The numbers above are simply examples and may not resonate with your lifestyle, as everyone's situation is different. While you might choose to use these numbers as a benchmark, it's more important to determine how much of your own monthly spending goes toward essential purchases and aim to save three to six times that amount.

Expert tip: Don't know how much you spend each month? Find out by tracking your own spending to see how much you actually need month-to-month. Once you have a good idea, plug your numbers into ouremergency savings account calculator . You'll even get an estimate of how long it will take to reach your goal based on how much you put away each month. Learn more about how to start saving for an emergency fund.

Where to stash your emergency cash

Where you keep your money is also important. An emergency savings account could be kept in a deposit account that earns interest and is liquid (like ourOnline Savings Account), instead of a certificate of deposit (CD) or an investment account.

Why? It's simple. Your emergency savings needs to be accessible.

With most CDs, you may have to wait until its maturity date to pull money out. Or, if you withdraw it early, you may have to pay a penalty. Drawing money out of an investment account could also trigger tax consequences, plus it usually takes several days before the cash hits your bank account.

Keeping your emergency fund in a savings account that earns a competitive interest rate means you don't have to jump through any extra hoops to get cash when you need it. Plus, your money could earn interest at a potentially competitive rate — meaning it's growing all the time.

Expert Tip: Take advantage of tools and technology to help you reach your goals. With Ally Bank's Online Savings Account, you can supercharge your savings with smart savings tools like Recurring Transfers and Surprise Savings, so you can reach your savings target even faster.

Saving for a Wedding, Vacation, Puppy and More

Fast Answer:

The costs for additional life expenses, like new homes, cars, weddings, children, etc. vary.
Use oursavings goal calculator to help set your savings goals and plans for five of life's major milestones, including a baby, a house and a car .
Prioritize your savings when aiming to save for multiple large expenses at once.

As you make progress saving for emergencies and retirement, you'll probably have other goals in the interim that'll require saving up cash to accomplish.

Maybe you're renting now andwant to become a homeowner — which means you'll need cash for a down payment and closing costs. Or you're in a serious relationship and would like toput a ring on it. Or maybe there's a baby in a baby carriage on the horizon. You'll want to start saving for college (and lots and lots of diapers).

And that's not all. You might one day hope to refurnish your living room, upgrade to a more spacious vehicle, or splurge on yourdream vacation — Saint-Tropez, anyone?

Of course, saving for these items will vary. But looking at the average cost of each expense and mapping out a timeline of when you hope to achieve your savings goal can give you an idea of how much you need to set aside.

Savings for Celebrations, Cars, Kids, and More
If You're Saving For...	Plan to Save...
A summer vacation (including travel, lodging, food, etc.)	$1,979/person
New living room furniture	$2,500
Down payment for an average small car	$2,000
A treadmill	$500 to $3,000
Down payment for a home (5% to 20% and based on May 2020 median home price)	$14,230 to $56,920
A wedding (based on 2020 average)	$19,000
College for your kids (average for four years at in-state public school)	$102,460
A puppy (average first-year cost for small to large dog)	$1,471 to $2,008

These are just a few examples of some popular savings goals and how you might save for them, based on their national average costs.

Smart tools and strategies for savers of all ages

Fast Answer:

Smart savings tools like Ally Bank's Buckets, a feature of our Online Savings Account, let you easily set goals, organize your savings and keep track of your priorities.
Microsaving can help you reach your savings targets even faster.
When in doubt, considerautomating your savings with recurring transfers or direct deposits.

Prioritizing and staying organized can keep you from stressing over not saving enough for all the things you want to do with your money. If you've got a plan for saving toward multiple goals, it reduces the chance that something slips through the cracks.

For example, say you want to adopt a dog a year from now and purchase a home three years after that. You can afford to save $800 a month towards both items. In this instance, you might sock away $100 each month for puppy preparation and $700 for the down payment on a house. After you adopt your new fur-ever friend, you can redirect that $100 over to your home savings fund.

The buckets tool in our Online Savings Account helps you organize your savings into separate digital envelopes and set specific goals for each, eliminating the need to open multiple savings accounts to track your progress.

To make saving go even smoother, consider going on autopilot. By automatically diverting a portion of your paycheck, initiating recurring transfers into your respective savings accounts, or using theSurprise Savings booster in our Online Savings Account, you can ease some of the stress of reaching your goals.

Finally, remember that when you're saving money, any little bit counts. If you aren't able to put away larger chunks of cash at a time, like $500 or $100 or even $50, that doesn't mean saving is out of the question. By usingmicrosaving strategies (or stashing away small amounts of money, usually less than $2 at a time), you can consistently add to your savings without the pressure of putting big amounts away all at once.

You've got this.

When mapping out your financial future, age may act as your savings compass. Let it point you in the right direction and help you visualize what today's savings can look like later on. And remember, you're never too young or too old to save for the goals that matter most to you.

One savings account, multiple savings goals. Customize and organize all your financial priorities with our Online Savings Account.

Check out our Online Savings Account.