Mapping out your financial future can be daunting, especially if you only have a vague sense of what you want to accomplish.
It can be useful to consider financial milestones to help you chart out your journey from college graduation through retirement. Here’s a look at some common savings goals by age to help you orient yourself and build a plan.
Savings Goals for Your 20s
In your 20s, people are often just out of school, starting a career, and getting their life in order. As if that wasn’t enough, challenges like student loan debt or credit debt may face them. Now is the time to set financial goals, consider an investment strategy, and start building healthy financial habits.
Paying off High Interest Debt
If you have any high-interest debt—debts of 7% or more—you might focus on paying it off. High-interest payments can cost you a lot over the life of a loan.
Credit cards, which often allow minimum payments that are much less than the total balance due, can be particularly costly as interest on the balance accrues. The more money going toward high-interest debt, the less you can focus on your savings goals.
Building Emergency Savings
At this age, people are often just getting on their own feet and might not have a lot of extra cash to stock away. Establishing a rainy day fund can be a useful savings goal. Generally, emergency funds contain at least three to six months worth of living expenses. This fund can help cover emergencies like unexpectedly needing to replace a car transmission, a trip to urgent care, or losing your income. Since you never know when you’ll need to access your emergency fund, consider saving it in an easily accessible vehicle, such as an online bank account.
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Saving for Retirement
The earlier you start investing for retirement, the longer you can take advantage of the powers of compounding interest — the returns you earn on your investment returns.
Compounding interest helps your investments grow exponentially. Consider taking advantage of any retirement accounts your employers offer, such as a 401(k). If your employer doesn’t offer a retirement plan, there are other options, such as setting up an individual retirement account (IRA), where you can save for retirement in a tax-advantaged way on your own.
Savings Goals for Your 30s
In your 30s, people are often more settled into a career path and may be thinking about other goals such as purchasing a house or having kids.
More Saving for Retirement
As your income grows and retirement gets a little bit closer, consider increasing the amount you’re setting aside for retirement. If your employer offers a match to your 410(k) contributions, taking advantage of the match can be a wise move, since this is essentially free money.
Buying a Home
If you’re thinking about buying a home, you’ll want to focus on saving for a down payment. The amount you will need to save will depend on housing prices in the area where you’re looking to buy. A larger down payment can make it easier to secure a mortgage, and can also mean that you pay less interest over the life of the loan.
Also, lenders may require borrowers to have mortgage insurance if they’re making a down payment smaller than 20%, which is an added expense to the home-buying process.
Setting up College Funds
If you have children, another consideration is saving for their college education. One way you can do this is to open a 529 college savings plan that helps you save for your child’s tuition and other education-related expenses. Just be sure not to neglect other long-term goals, such as retirement, while saving for your child’s college education.
Savings Goals for Your 40s
As you enter your forties, you are likely entering your highest earning years. If you have your high-interest debts behind you, you can devote your attention to building your net worth.
Keeping an Eye on Your Emergency Fund
The amount of money you needed to cover six months worth of expenses in your 20s is likely far less than what you need now, especially if you have a mortgage to pay and children to support. You’ll want to make sure that your emergency fund grows with you.
Protecting Your Assets
Now that you have a more substantial income and own some valuable things, such as a home and a car, you’ll want to make sure you protect those assets with adequate insurance. Home and auto insurance protect you in the event that something happens to your house or your car.
You may also want to consider getting life insurance if you haven’t already. This can provide a cash cushion to help your family replace your income or cover other expenses should you die. The younger you are when you purchase life insurance, generally the less expensive it will be.
Savings Goals for Your 50s
In your 50s, you’re likely still in your top earning years. You may still be paying off your mortgage, and your kids may now be out of the house.
Taking a Closer Look at Retirement Savings
As retirement age approaches, you’ll want to continue contributing as much as you can to your retirement account. When you turn 50, you are eligible to catch-up contributions to your 401(k) and IRAs.
These contributions provide an opportunity to boost your retirement savings if you haven’t been able to save as much as you hoped up to this point. Even if you have been meeting your savings goals, the contributions allow you to throw some weight behind your savings and take full advantage of tax-advantaged accounts in the decade before you may retire.
Continuing to Pay Off a Mortgage
If you think your monthly mortgage payments may be too high to manage on a fixed income, you might consider paying off or refinancing your mortgage before you retire.
Goals for Your 60s
As you enter your 60s, you may be nearing your retirement. However, when it comes to saving, you don’t have to slow down. As long as you are earning income, you might want to keep funding your retirement accounts.
Thinking Long-Term
Now is a good time to assess how much you have saved for retirement and perhaps adjust what you are contributing (based on how much you’ve already put aside and how much you can afford). At the same time, you may want to plan out a retirement income strategy, which is when you’ll start withdrawing funds and how much you’ll take each month or year. You’ll also want to decide when to start taking Social Security.
The Takeaway
Everyone’s personal timeline is different. The milestones you hit and when you hit them may vary depending on your personal situation. For example, someone graduating from college with $50,000 in student loan debt is at a very different starting point than someone who graduates with no debt. And while someone might be able to buy a house in their early 30s, others may live in a more expensive area and need more time to save.
No matter your starting point and situation, a simple way to manage your finances at any age is to open a checking and savings account where you can spend, save, and earn all in one product. With a SoFi Checking and Savings account, you’ll earn a competitive annual percentage yield (APY) and pay no account fees, both of which can help your money grow faster.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
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