Are you looking at how to save for retirement at 30? It’s not too late! In fact, you can always catch up with your retirement savings, and 30 is the perfect age to take advantage of increased income and compound interest. Here’s what you need to know about saving for retirement at age 30!
How much should a 30-year-old save for retirement?
According to experts, you should have an amount equal to your annual salary by age 30. In other words, if you’re making $50,000, you should have $50,000 saved by 30. This can mean $50,000 in savings, investments, and even in your 401(k). But that is the general rule of thumb.
Of course, don’t worry if you’re not there at the moment. This post will also go over how you can reach that goal in your 30s.
What if you’re 30 and you haven’t started saving for retirement yet?
Is it too late?
The simple answer is that it’s never too late to start saving for retirement. However, the sooner you start saving, the bigger the advantage you have with compound interest. (In other words, your money can make you more money over time.)
What is the best way to save for retirement at 30?
Can you start saving for retirement for retirement at 30? Of course! But how?
We’ll dive deeper into the best way to save for retirement at 30, but one of the easiest ways is to start with your job’s 401k!
Not only will it be easy to set up, but you may get some benefits that you wouldn’t get on your own — like matching.
How much should I be saving every month?
Expert sources recommend that you should be saving 20% of your income every month — at least — by 30. Again, you may not be right at that mark just yet, and that’s okay. But aim for saving at least 20%, and then raise that as you can.
How much should a 30-year-old save a month?
If you can’t save 20% of your income just yet, aim for at least $100 a month. You can even break this up per pay period.
But something is better than nothing, and $100 can still grow if you’re investing it in your 401k or other investments.
How much does the average 30-year-old have in their bank account?
While there is not a specific average for 30-year-olds, for those 34 and younger…
- Couples without children have an average of $4,727 in savings.
- Single people 34 and younger have an average of $2,729 in savings.
So…it’s safe to say that most don’t have the recommended annual salary saved.
Along with having saved your annual salary by age 30, experts say your goal is to have half your salary stored in your retirement account. In other words, if you’re making $50,000 a year, you should have $25,000 invested.
Where should I be financially at 30?
By 30, both your savings and investing should (hopefully) be in good standing. If those are lacking, now is the time to be focused on them. And, you should also be looking into having a higher-paying job, a budget that meets your needs, and free money to spend on wants too.
Where should I be financially at 35?
By 35, you should have one-and-a-half times your income saved for retirement. Using the $50,000 a year example, that means having $75,000 saved.
By this time, you should also…
- have credit card debt (and other consumer debt) paid off,
- be in the process of or be finished with paying off student loans,
- and be investing in your retirement regularly.
Of course, these are just guidelines by experts. Not every 30-35 year old is going to meet all of these goals. And that’s okay. But by focusing on the bigger picture and your future, you can work on them.
Is 35 too old to start investing?
What if you’re in your mid-30s? Is it too late to start investing if you’re 35?
You are NEVER too old to start investing, even if you’re close to retiring!
The sooner you start, the better, but you can also start at any time.
There are a few main ways to start saving for retirement in your 30s. However, we’re going to focus on three main ways to save.
Of course, do what’s best for you and what will give you the most flexibility and freedom in your retirement.
1) Invest In Your Company’s 401k
Not sure what you should do, but you want to know how to save for retirement at 30?
Investing in your company’s 401k is one of the best places to start.
Investing in a 401k can reap significant tax advantages. Since the money you contribute is made from pre-tax wages, your contributions and earnings accumulate tax-deferred. In other words, you won’t be taxed on that income until you make withdrawals after age 59 ½ (depending on your plan). And, when you invest, it lowers your overall income, thus saving you money on taxes now too.
Once you retire and start withdrawing your funds, they are taxed at your ordinary rate — just like you pay taxes now. And, you can even get a tax-deferral if you roll your assets into an IRA (more on that in a second).
One of the biggest benefits of investing in a 401k is that many companies match a portion of your contributions. Of course, this will depend on who you work for, but many can match upwards of dollar for dollar up to a certain percentage. That’s free money added to your investment accounts that you don’t have to save yourself.
Now, what if you don’t have access to a 401k, or what if you work for yourself? Then what’s the answer for how to save for retirement at 30?
The second best investment option is investing in a traditional IRA or Roth IRA. These accounts do have smaller contribution limits. For example, the current rate is $6,000 in 2022.
But, the benefit to an IRA is that you can save and invest this money in addition to other investment accounts. And, an IRA is pre-taxed, so when you withdraw it during retirement, you won’t owe anything additional.
This is why many people roll their 401k investments into IRAs — generally speaking, it can save you a ton of money come tax time in retirement.
Last but not least, focus on passive income opportunities. This could be a turn-key business, purchasing stocks with dividends, or even having an Airbnb or rental home that you have managed by a property management company.
There is no limit to passive income options, you just have to find those that work well for your future and how much you are willing to put in at the beginning.
How to Save For Retirement at 30: You Can Do This!
Saving for retirement can seem daunting at first, especially when you hear that “the earlier you can start, the better”. But 30 is not too old to save for retirement. In fact, you still have plenty of time left and can use that to your advantage!
These tips can help you make better investment decisions, and get you well on your way to a sizeable investment account. Just be sure to check in with your investments from time to time, and save wisely!
Do you feel a little more comfortable for how to save for retirement at 30? What option will you choose?
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn’t spending time with her daughter and husband, or crying over This Is Us, you’ll find her teaching other mompreneurs how to scale their business without scaling their workload.