How Much Money Should I Have Saved by 35?

Cole Mayer
A smiling woman holds a piggy bank.

Your mid-30s are when you really start to accumulate buying power. It’s a time when you finally have a decent paycheck and the ability to start putting money away for retirement. If you plan to retire at 67, it’s time to ensure you have a plan, given that you will want around $1 million in the bank for retirement.

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How Much Should I Have in Savings?

The general savings rule-of-thumb for a 35-year-old is to have at least double your annual salary in the bank. If you make $25,000 per year, that means having $50,000. If you earn $50,000, that’s $100,000 in the bank. Looking ahead, by 50, you’ll want to have six times your salary. It’s important to note that this isn’t just liquid cash in a savings account; the figure includes all of your investments, such as your 401(k), Roth or traditional IRAs, and pension.

For reference, the average 401(k) balance was $103,700 in Q1 of 2019. The average IRA account held $107,100. A millennial that started an account with an average of $7,000 in 2009 now has an average of $129,800.

How Much Do I Need to Save for Retirement?

There is no one-size-fits-all answer, as this is generally based on what kind of lifestyle you want to live after retirement. If you want to live the high-life and eat out frequently at fancy restaurants, you will need to save more than someone who just wants to kick back and read books on their porch with a home-cooked meal each night. A good ballpark estimate, however, of what an average retiree spends in a year is somewhere between $30,000 and $45,000. About $13,000 of that figure comes from Social Security.

To find out how much you will need to support your chosen lifestyle, use AARP’s excellent retirement calculator.

As noted earlier, the general advice is to save $1 million for retirement. Even at 35, with double your wages in savings, that may seem like an impossible achievement. With your savings, utilizing company contribution matches, and starting retirement accounts as early as possible, the goal may not be as far off as it seems.

Saving for Retirement in Your 30s

While it’s best to start in your 20s, your 30s are still a great time to start a retirement account as well. The best advice is, no matter how old you are, start saving now. Get the account open, contribute every paycheck, and let compound interest build your savings. The 401(k) contribution limit for 2019 is $19,000 per year, while the IRA limit is $6,000 per year.

In the second quarter of 2018, Americans between 40 and 49 had an average balance of $103,500 in their 401(k). They were contributing 8.4% of their paycheck into a retirement account. Employers matched an average of 4.6% for a total of a 13% savings rate. These numbers only apply to those who already have an open retirement account. A 2017 report revealed that 38% of Gen X, ages 35 to 44, had no retirement savings. While a quarter of Americans had $10,000 or more, 43% had less than $1,000. For young millennials, ages 18 to 24, 46% had no savings, and 21% had less than $1,000.

Retirement Accounts

If you didn’t open a retirement account in your 20s and you are staring down 35, you still have plenty of time to let compound interest do its work. A retirement account opened through your employer is called a 401(k) plan. Private plans, such as through Vanguard or Fidelity, are referred to as individual retirement accounts, or IRAs. The major difference is a traditional IRA does not see contributions taxed until you take the money out, presumably after you have retired. Roth IRA contributions are taxed as they enter the account, meaning when you take out money from the account after you retire, you get the full amount in the account.

How to Start Saving at 35

The first order of business is obviously to open a retirement account. If you are 35 already, you will likely want to be more aggressive in contributions than if you opened the account in your 20s. The ideal at 35 is to contribute 15% of your paycheck. If that’s not possible, start lower, and work up 1% annually until you hit 15. If you want to live more lavishly in retirement, keep going and save more as long as you feel comfortable with a smaller paycheck. If you have an employer matching your retirement, you will find it’s not hard to put away the recommended double-your-salary amount in an account.

To further help you save money, it might be a good time to ask for a raise. You can also create a personal budget to better live frugally — cutting down on expensive restaurants, bringing your own lunch, brewing your own coffee — and save a few dollars here and there to contribute. You can also use your budget to pay down any debt you may have. After your debts are paid, use the part of your paycheck that went into paying those to contribute to your retirement account.

Remember that all of these are guidelines. The plan may not work for your situation — it’s hard to find a job that pays well these days. In that case, do what you can for now, and try and catch up when you can. Putting away money now means an easier, fun retirement later.

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