Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. Select will update as changes are made public. Show How much you should be saving for retirement is an age-old question that just about everybody wants to know. While the answer has a lot to do with when you plan to retire and the type of lifestyle you want to have in retirement, there are some general guidelines that you can follow at every age to help get you there. Subscribe to the Select Newsletter! Our best selections in your inbox. Shopping recommendations that help upgrade your life, delivered weekly. Sign-up here. How much money to have saved at every ageAccording to retirement-plan provider Fidelity Investments, the rule of thumb is to save 10 times your income if you want to retire by age 67. Adjust this amount if you want to retire any earlier or later. Those retiring at 62 (the earliest you can claim Social Security) will need to save more to compensate for an additional five years without income. Those retiring at 70 probably won't need the full amount of 10 times their income, as they will have worked an additional three years and presumably have fewer years left to spend their savings. While Fidelity's guideline is a big goal, it's more manageable when you start early and have many years to reach it. Fidelity suggests the following age-based savings milestones that would provide enough income for you to continue your current lifestyle in retirement (rather than planning to downsize or spend more). Here's how much cash they say you should have stashed away at every age:
The above savings guidelines include anything you have in a retirement account, like a 401(k) or Roth IRA, company matches, as well as your investments in things like index funds or through robo-advisers. While personal savings goals can differ between individuals, these milestones can help you stay on track or kick it into gear if you're nowhere close. How to start savingTo reach the above suggestions, Fidelity recommends that you save 15% of your income each year (since age 25) and that, over your lifetime, you invest more than 50% of your savings in stocks to get a higher return on your money. If this seems like a lofty goal for your finances, you're not alone. According to a 2020 TD Ameritrade report, which surveyed 2,000 U.S. adults ages 40 to 79 with at least $25,000 in investable assets, nearly two-thirds of 40-somethings have less than $100,000 in retirement savings and 28% of those in their sixties have less than $50,000. Looking at a younger demographic, a 2019 TD Ameritrade survey found that 66% of millennials (ages 23 to 38) said they need to catch up on their retirement savings. But anyone, no matter their age or amount in savings, can get started with the same principles. Thanks to compound interest, which means you earn interest on interest, it's beneficial to start saving early — even if it's a small, regular contribution — and let it build over years and decades. It's also important to balance short-term savings goals. Experts typically recommend having at least three to six months of living expenses in an emergency fund in case of job loss or an unexpected cost. Savings accounts provide a place to save your cash so that it's easily accessible. An online high-yield savings account can help grow your money faster than a normal savings account would. Select found that putting just $20 in a high-yield savings each week can help you save $1,000 in a year. This whittles downto saving less than $3 per day, which just goes to show you don't need to have a lot of money to start preparing for your future. You can make it even easier on yourself by setting up direct deposit from your checking account and having the money automatically transfer into your savings. Sallie Krawcheck, former Wall Street titan and CEO of digital investment platform Ellevest, says automating your savings is her number-one piece of advice. To get started, consider a high-yield savings account that offers a yield greater than the national average savings rate and comes with zero monthly fees and no minimum deposits or balance requirements. The LendingClub High-Yield Savings account offers 2.07% APY regardless of your account balance. Unlike many savings accounts, account holders can also receive a free ATM card for easy withdrawals. LendingClub High-Yield SavingsLendingClub Bank, N.A., Member FDIC
A second option would be the Synchrony Bank High Yield Savings. It currently offers a 2.05% APY and all savings account holders can receive an ATM card (with no checking account requirement). A savings account is meant to grow your money over the short-term, but if an emergency comes up it's good to know you have easy access to your cash. Synchrony Bank High Yield SavingsSynchrony Bank is a Member FDIC.
Terms apply. In addition, you should be saving money in a retirement account, such as an IRA, which is offered by brokerages like Charles Schwab. These accounts offer tax benefits and encourage you to leave your funds untouched by imposing early withdrawal penalty fees should you tap into your earnings before age 59 and a half. Charles Schwab
Terms apply. Bottom lineHaving savings milestones for each decade of your life can help motivate you to save, knowing that the end goal means retirement at the age of 67. But the main takeaway is that you can start saving now, no matter what age you are. The first step is to have a plan and start putting aside the cash you can today. Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party. Is 10% for retirement enough?Saving only 10% of your income—a time-honored yardstick financial planners often use—isn't enough to retire. Saving 10% of your salary per year for retirement doesn't take into account that younger workers earn less than older ones.
Is 20% too much for retirement?Experts often recommend between 10% to 15%. If you are within 10 years of quitting work for good, you can do some more detailed planning that will shape how much you need to save in the years just before you retire.
What's the 50 30 20 budget rule?One of the most common percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.
Can you retire $1.5 million comfortably?Is $1.5 million enough to retire at 60? Yes, you can retire at 60 with $1.5 million. At age 60, an annuity will provide a guaranteed income of $91,500 annually, starting immediately for the rest of the insured's lifetime. The income will stay the same and never decrease.
|