How Much Should Millennials Have Saved At Every Age?
With the oldest millennials pushing 40, it is not surprising to this financial planner that many people are asking, “How much money should I have saved by my age?” Would you believe one-in-six of millennials has already saved $100,000? That is well beyond what the average 50-year-old has saved, according to a GAO Study. While not the case for every millennial, many are on track for a secure retirement.
How much should I have saved at every age? What should my net worth be throughout my life? These are questions that every working American should be asking sooner. The good news is that some millennials are already on the retirement-saving bandwagon. According to a survey by Bank of America BAC , a surprising 16% of millennials between the ages of 23 and 37 now have at least $100,000 saved for retirement.
I know we are all living through a global pandemic at the moment, but for those still earning a living, the coronavirus is not a good enough reason to not keep your financial house in order. Although the national savings rate spiked to a whopping 32.2% in April, I don’t think millions of Americans decided to get serious about saving. The spike likely occurred because many people found it hard to spend, spend, spend when much of the country, and the world was on lockdown.
To put millennial retirement savings in perspective, here is some info from CNBC:
-Average retirement savings of families between 50 and 55: $124,831
-Median retirement savings of families between 50 and 55: $8,000
The large gap between the mean and median savings is caused by wealthy individuals (think Jeff Bezos, Warren Buffet, or even Kylie Jenner). It takes quite a few people with zero dollars saved to offset someone with hundreds of millions of dollars, or even billions, of net worth. Compare that to the median number, which has 50% of the people below it and 50% above it. In this case, a billionaire will only balance out one person who has saved nothing for retirement.
Let that sink in. Fifty percent of families between 50 and 55 have less than $8,000 saved for retirement. Hopefully, millennials will be better prepared for the future than Gen X.
How much should a 30-year-old have saved?
How much you should have saved is related to how much you earn. The goal would be to have at least one year of salary saved by the time you reach thirty years old. The median salary for people aged 25 to 34 is around $40,000. It would seem the 16% of millennials with $100,000 saved are ahead of the game. My guess is that many of them also have higher-than-average incomes. The more you make, the easier it can be to save $100,000. This group of people has also likely benefitted from smaller-than-average student loan debt burdens.
What should you have socked away at various ages?
Keep in mind these are just basic rules of thumb for net worth levels. If you want to retire early or head off to a second career, you may need to be saving even more. This scenario refers to retirement only and does not take into consideration other factors such as college funds or a down payment on a home.
Factors such as your lifestyle and at what age you want to retire should also be pondered because they will also affect the amount you should have saved. Here are some benchmarks to shoot for.
Millennials in their Twenties
Millennials should strive to accumulate 25% of their overall gross pay during their twenties. This can be a combination of savings, investments, and retirement accounts. This number may be lower if you are paying down staggering student loan debt.
Have at least one year of salary saved by the time you turn 30. If you make $100,000, per year, try and have $100,000 saved. Suppose you are making a $40,000, per year. If so, shoot to have that amount saved. Likewise, if you are killing it and making $500,000, per year, your goal would be to have a net worth of at least $500,000.
For those just starting, put away at least 10% of your gross salary. To make this a little easier on those with a mountain of debt, you can include money you are using to pay down debt in this percentage. In terms of net worth, you can include money you put down on a house purchase. I wouldn’t count home equity unless you own rental properties or a second home that produces income.
Millennials Net Worth Age 35 to 40
Having double your annual salary saved should be the goal of 35-year-olds. Four times your yearly salary is the target for people who reach the ripe old age of 40.
The earlier you begin saving, the more work compounding interest will do for you. If you want to accumulate a million dollars for retirement, it is really easy if you start young. If you start at 24, you will have $1 million at 69 by saving just $35 per month. That’s assuming a 10% return. If you start at 40, you’ll need to save $561 per month. That’s still pretty manageable, but that means more than 16 times as much money out-of-pocket, each month, to get to the same end result, becoming a millennial millionaire.
I know all of this talk about saving and aging has likely caused many of you to cringe. But I assure you, investing for a happy and secure retirement is easier to accomplish than it sounds. With a little help from employer contribution matches and tax deductions, you will be on your way to financial independence before you know it.
The important thing is to get started if for no other reason than to lower your tax bill by opening a retirement account. Be sure to get every penny of your employer’s matching contribution. This is like free money from your boss. Growing a multi-million-dollar net worth is actually easier than it sounds.