Are You Saving Enough? A Look at Average Balances Across Ages | Global News Avenue

Savings year after year

Each decade of life brings new financial needs and new savings opportunities. Here is a brief overview of some of the key takeaways.

Savings in your 20s

Unless you’re incredibly frugal (or extremely lucky), your savings You are in your early 20s It probably doesn’t add up to much. On the one hand, you’re most likely just starting your career and earning an entry-level salary or nothing more. On the other hand, you may need any spare cash to pay off your student debt.

But no matter how meager your resources, your 20s are a great time to start saving. Two worthwhile goals are to build an emergency fund just in case and to put as much money into a 401(k) or similar retirement plan if your employer offers it, especially if your employer is willing to do so. match Some or all of the amount you contribute.

In particular, consider a Ross Account (if your employer offers this option). Roth accounts don’t offer any tax deductions for your contributions like traditional accounts do, but since you’re probably in a lower tax bracket now anyway, it probably won’t make much of a difference. When you’re ready to retire one day, you’ll be eligible to withdraw your funds and any earnings from them tax-free, so think of it as a gift to your future self. What’s more, the money isn’t completely locked in if you need it before then; you can withdraw your contribution (but not its earnings) at any time tax-free and penalty-free.

Savings for your 30s

to a certain moment You in your 30s, You might make more money, giving you some disposable income to put toward savings. This is also a time when many people consider starting a family and/or buying their own home – both of which, while rewarding in other ways, can cost a lot of money.

When you’re faced with competing demands for spare cash, consider increasing your retirement savings if you’re able.

Additionally, if you do purchase a home, rest assured that homes typically appreciate in value over time, which can also help you save money by building a home fair.

Savings in your 40s

you are in your 40s May mark the beginning of your peak earning years. According to the U.S. Bureau of Labor Statistics, those ages 45 to 54 earn more on average than any other age group.

Therefore, this may also be your peak savings period. If you have children heading off to college, you may want to put some of your savings away 529 College Savings Plan If you haven’t done so already. These plans allow you to set aside funds that you can withdraw tax-free if you use them for qualified education expenses. Some states also offer tax deductions for your donations.

Don’t slack off on your retirement savings, either. You may have 20, 30 or more years until retirement, which means you’ll have a long time to grow before you start needing the money.

Savings for your 50s

In your 50s, retirement seems less like a distant fantasy and more like something that might actually happen to you one day.

If you can afford to increase your retirement plan contributions, note that at age 50, you become eligible for additional contributions catch up contribution. For example, in the case of 401(k) plans, anyone age 50 or older who earns enough can contribute up to $31,000 in 2025 ($30,500 in 2024), which is higher than the maximum contribution for younger workers in 2025 $23,500 ($23,000 in 2024) is $7,500 more. ).

You should still save for retirement if you can, but age 59.5 is the age when you can start withdrawing funds from your retirement savings No penalty if you need.

On average, people’s peak earning years last until their 50s. As mentioned earlier, people aged 45 to 54 have the highest average income. Income for those aged 55 to 64 will fall. However, the numbers for the latter group may be dragged down a bit by workers who retire early or lose their jobs and find it difficult to find new jobs at their previous wages. Employees with thriving careers may continue to receive raises and promotions after age 55, thereby increasing their savings.

Savings for your 60s

go through you are over 60 years oldyou may have a lot of money saved for retirement. (If not, you may need to do some catching up, so see the discussion of catching up contributions above.)

Even if you plan to retire soon, you should remember that retirement can last a long time. For example, if you retire at age 65 and live to age 95, some of your retirement savings will have 30 years to grow.

If you’re lucky, you may no longer have to pay for college and your house (if you own one) will be mostly paid off. Assuming you still have income, this could be another opportunity to increase your savings rate.

Savings by retirement age and beyond

Many people continue to save money after retirement. Today, there is no age limit for making contributions to a retirement plan. (Traditional IRA contributions used to stop at age 70½, but that changed in 2020.) you really need income earned For this reason, although the income does not necessarily come from a full-time job.

Of course, you can also save money outside of your retirement plan. In fact, by your 70s, you have no choice but to start taking withdrawals from your retirement plan (except for Roth accounts), whether you need the money or not. That’s because you will be subject to Required Minimum Distribution (RMD) Begin withdrawals from any non-Roth retirement account at age 73. You must also pay income tax on this money.

How much savings should you have?

Ideally, your savings should grow over time. One way to think about how much you should plan to save at any given age is to think of it as a multiplier of your income. For example, this is a fairly common formula:

• Savings at age 30: equivalent to your annual salary
• Savings at age 40: Three times your income
• Savings at age 50: six times income
• Savings at age 60: eight times income
• Savings at age 67: 10 times income

Of course, this is just a guideline, but if your savings are much lower than this, it might be a sign that you should try to save more aggressively.

Strategies to Increase Savings

If you need to increase your savings, there are a number of ways to do it, and not all of them are painful.

1. Watch your spending. Any money you can switch from spending to saving can be kept. While many of us cringe at the wordBudget,” creating one can be a great way to figure out where your money is going and separate your essential expenses from those that are merely optional (and expendable).

2. Pay off debts. Some debt, like a home mortgage or federal student loans, is legitimate and often unavoidable throughout your lifetime. Other debt, such as high-interest credit card debt, can unnecessarily drain your financial resources. So if you have one, pay it off as soon as possible and put the extra money into your savings.

3. Automate it. You can even save without thinking about it by scheduling regular withdrawals from your paycheck or checking account and depositing them into a separate savings or investment account. Another benefit of this is that the money disappears from your sight before you have a chance to spend it.

4. Invest wisely. Growing your savings isn’t just about the amount you set aside. It’s also about what the money can do for you. So, for example, instead of settling for a bank account with a low interest rate that you might not be able to keep up with, inflationresearch high-yield accounts, money market funds, and other suitable options. More on this in the next section.

Where to keep your savings

As mentioned before, you have almost unlimited options when it comes to saving and investing.

If you’re just starting out, your first goal should probably be an emergency fund. Generally speaking, the best place to park this money is in an account that is highly liquid and unlikely to decline in value. High Yield Savings Accounts and money market funds These criteria can be met.

Once you’ve built up a sufficient emergency fund, you can start to be more adventurous with your savings. For example, you might want to look at stock or bond mutual funds or ETFs. They have the potential to earn more than savings or money market accounts, but they also run the risk of losing money. To avoid taking too big a risk with your savings, it’s best to build one over time Diversification An investment portfolio consisting of a number of different asset types.

Keep this concept in mind as you allocate your retirement plan contributions. Most employers offer a menu of investments of different types and levels of risk. If there is one on the list you may also consider target date fund;These funds gradually adjust their risk levels over time, becoming more conservative as you approach retirement.

bottom line

Saving enough money can be a lifesaver in some situations and bring great comfort at other times. Ideally, your savings should grow over your lifetime, eventually providing you with enough money to enjoy retirement without any financial worries.