Figuring out how much money to save for retirement by age 30 can be a maddening prospect. Between the finger-wagging financial news that scolds your generation for not saving enough and the fact that any concrete advice often seems to ignore the reality of underemployment, stagnant wages and student loan debt, it can feel impossible to even set a goal for yourself.
But there are some guidelines that indicate how much is wise to save by 30 — and it’s an achievable goal. Here’s how you can make sure you’re on track with your retirement savings by the time you bid your 20s goodbye.
How much should I have saved by 30?
Life might be simpler if experts could give a specific number everyone should reach for, but widely varying financial circumstances make that impossible. Even when you have a standard benchmark, such as saving $1 million by the time you retire, the path to get there can differ depending on how much you make and when you start saving.
The next best thing to a specific number is Fidelity’s widely accepted savings guidelines. According to Fidelity’s rule of thumb, you should aim to have one year’s salary set aside by your 30th birthday. In other words, a person who earns $50,000 per year should expect to have $50,000 in a retirement account by the time she hits that milestone birthday.
Fidelity’s guidelines go on to suggest that you save double your salary by age 35, triple your salary by age 40 and so on to build a nest egg worth 10 times your salary by the time you reach age 67.
So, what if you are 29 and have not yet put away a single penny for retirement? Remember that Fidelity’s guidelines are just that: guidelines. If you’re getting a late start or had to hit pause on your savings because of major debt or a financial emergency, there’s no need to panic that you will be forever behind. You can increase your savings rate and get on track even if you’re starting later.
6 ways to boost your savings if you’re behind
Underfunding your savings account is a common problem. According to data from the Federal Reserve and the Federal Deposit Insurance Corp., 29% of American households have less than $1,000 in savings and the median American household has only $11,700 in bank accounts and retirement accounts as of June 2018.
But no matter how far behind you are from your retirement savings goal, you can beef up your savings rate — you just need to get in the habit of saving. Here are six ways to do that.
1. Don’t put off opening a retirement account
As of 2016, only 44% of private-sector workers participated in employer-sponsored defined contribution retirement plans, according to the Bureau of Labor Statistics.
Some of that lackluster participation stems from the fact that not everyone has access to an employer-sponsored retirement account. If that describes you, make sure you explore your options for opening either a traditional or Roth individual retirement account (IRA) as soon as possible. It may be easy to put off, but it belongs at the top of your to-do list.
2. Take advantage of company matching
If you are lucky enough to have an employer that offers a company match of contributions to your retirement account, then you need contribute enough to receive that match. Matching contributions are like free money that can help you reach your goals.
According to record-keeping company Alight Solutions, in 2017, 80% of participants in employer-sponsored retirement plans contributed enough money to either meet or exceed their employer matches. That means 20% of all workers were leaving money on the table — and the highest percentage of workers who contributed below the match was in the 20-to-29 age group.
If you want to hit your goal by age 30, increase your contributions to receive your company’s match. Every dollar your company contributes is less money you personally have to save.
3. Aim to contribute one hour of income per day to your retirement account
Money expert and author David Bach offered this rule of thumb for reaching your retirement savings goals. He suggested setting aside one hour’s worth of income per day in your retirement account. That equals 12.5% of your income, and it is an excellent and memorable goal for making sure your retirement account is well-funded.
4. Increase your contributions by 1% every quarter
Of course, setting aside 12.5% of your income is a tall order. If there’s no way you can increase your contributions that much all at once, commit to increasing by 1% to 2% every three months until you have reached 12.5%. You are less likely to feel the pinch when it is only a small percentage at a time.
5. If you get a large tax refund each year, adjust your withholding
If you regularly get a large tax refund, you can adjust your withholding so you receive a smaller refund (or none at all) and have more money in your paychecks to send to your retirement account. Use the Internal Revenue Service’s withholding calculator to determine the correct number of allowances you may take.
Request a new W-4 from from your human resources department to adjust your withholding allowances — and set up an automatic transfer of your paycheck’s increase into your retirement account at the same time.
6. Increase your contribution amount every time you get a raise
With each raise you receive, make sure at least half of your raise is going into your retirement account. You won’t feel the loss of the money you don’t see, and your retirement account will grow along with your career.
Having one year’s salary saved by age 30 is an excellent benchmark — it’s clear, particular to your financial situation and achievable. It also can be an intimidating goal.
That’s why making a consistent habit of saving as much as you can for retirement is the real skill to master before you turn 30. This habit will serve you well throughout your years of nest egg building no matter how much you have saved by age 30.