Saving for retirement is an important financial goal, and over time, your savings balance should continuously increase. But how much do Americans save for their later years and for emergencies?
Retirement vs. Emergencies – Which Comes First?
Experts recommend saving at least three months’ worth of expenses before starting to save for retirement, with six months being better. Calculate what you spend on rent or mortgage payments, utilities, insurance premiums, uninsured healthcare costs, food, or debt servicing. Then multiply that number by three to six depending on your goals.
Retirement Savings
Knowing how much you’ll need for retirement is a guess based on knowledge, especially when you are young, as you can’t know how long you’ll live off your savings. Additionally, you also need to estimate your future financial needs by budgeting. Experts recommend having savings equal to at least one year’s worth of your current income by age thirty. They suggest having three times your current annual income by your forties.
Emergency Savings
Experts recommend having at least three months, but ideally six months of living expenses saved in an emergency account. This amount is calculated by multiplying your budget by the appropriate number of months. You can cut back on some luxurious expenses in your monthly budget to reach this number and stick to covering only necessary bills. Individuals in their thirties, on average, spend about $3,400 a month on living expenses, while those in their forties allocate around $4,300 monthly for their budgets.
Average Savings for Those in Their Twenties
Young generations face one of the biggest challenges when saving for retirement due to wage stagnation and heavy student debt, but a Bankrate survey indicates that they are actually leading when it comes to actively contributing to their retirement plans.
The Transamerica Center for Retirement Studies estimates that the median retirement savings for millennials is about $23,000. Fidelity assumes that a traditional saver should aim to have savings equivalent to 25% to 50% of one year’s salary by age thirty. It is reasonable for a person in their twenties with a median income of $31,000 to have savings equal to one full year of income by the age of thirty.
Average Savings in the Thirties
You still have a chance to head toward retirement by your thirties. Living costs may be higher at this stage, and expenses may increase due to marriage or starting a family. You also have emergency savings to consider. Numbers showed that individuals in this age group had average monthly expenses of about $3,400 in 2018. This could amount to up to $20,400 for six months of expenses or $10,200 for three months of expenses. According to the Economic Policy Institute, the average retirement savings for Americans aged 32 to 37 was $32,602 by 2016, whereas it should be closer to $67,000. This number significantly increases for late thirty-somethings and early forties. In this age group, regular retirement savings rise to $61,933. The median annual salary for the 35 to 39 age group is $50,752, according to the Department of Labor. Fidelity recommends that individuals aim to save at least the equivalent of one year’s salary by age thirty and three times their current annual income by age forty. However, thirty-somethings have not achieved these goals according to numbers from the Economic Policy Institute.
Average
Forties Savings
When you reach your forties, you may enter the decade that is considered the “peak earning level,” but the expectation of paying college tuition for your children in the next few years may put pressure on your ability to save for retirement.
According to the Economic Policy Institute, the average income for an American in their early forties is about $67,000. The median savings amount is approximately $113,370 for those aged 44 to 49. Estimates show an annual expenditure of $49,279 in that age group. Spending decreases from $56,267 for the 55-64 age range to
Source: https://www.thebalancemoney.com/average-retirement-savings-by-age-4155888
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