How much should I have saved for retirement by age 30?

So you’re turning 30-years-old and you’re starting to think about financial goals and retirement. A lot of 30-year-olds are currently in a tough spot with their finances since they’ve likely graduated with a hefty amount of student loan debt while entering one of the worst job markets in decades. Hopefully, you’ve been fortunate enough to find a job, begin a career, and begin contributing to your retirement.

What I wanted to discuss was how much you should have saved by now in your 401(k) or IRA by the time you are 30-years-old. The basic rule of thumb is that you should have saved 1x your salary by the time you for 30-years-old. That seems realistic, but still a lofty goal for most individuals approaching their 30’s. Fidelity believes this goal should be reached by the time you’re 35 rather than 30, so if you’re not quite there yet, don’t worry. You have another 5 years to reach that goal.

30-years-old-retirement-savings-goalsMost employers will suggest putting away 10% of your salary to contribute towards your 401(k) plan. By the time you graduate college and enter the work force, you are 22-years-old. Assuming you land a job paying $50,000 out of college, you’re contributing $5,000 per year towards your 401(k). Over the 8-year period until you reach your 30’s, you’ll have $40,000 stashed away in your 401(k), which is close to the $50,000 goal you had set when you began your career.

Use that guideline (1x your annual salary by the time you reach 30) as you think about financial planning and your retirement. If you haven’t reached that goal, you have some more work cut out for you. What you would want to consider doing is increasing your 401(k) contribution. The maximum contribution for 2013 is $17,500. Increase your 401(k) contribution to max it out. If you don’t have an IRA, open one. It’s quick and easy and allows you to contribute an additional $5,500 on top of your 401(k) contribution. The 2013 IRA contribution limit is $5,500.

By increasing your contributions and maxing out both your 401(k) and IRA, you will get on track with your retirement planning. The end goal is to have 8x your salary saved according to Fidelity by the time you reach retirement. Fidelity suggests the following benchmarks for retirement planning:

  • 35-years-old – 1x your salary
  • 45-years-old – 3x your salary
  • 55-years-old – 5x your salary
  • 65-years-old – 8x your salary

If you have any questions or comments regarding your retirement planning or the age milestones outlined above, feel free to comment below.

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