Savings Goals by Age: Smart Financial Targets by Age Group
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 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.
Key Points
• In your 20s, consider prioritizing paying off high-interest debt, building an emergency fund with three to six months’ expenses, and starting to save for retirement.
• In your 30s, you may prioritize saving for a home down payment, increasing retirement contributions, and setting up a 529 college plan for children.
• In your 40s, think about growing your emergency fund, protecting assets with insurance, and continuing to save for retirement.
• In your 50s, take advantage of catch-up contributions to increase retirement savings and consider paying off or refinancing your mortgage.
• In your 60s, you may continue to fund retirement accounts, assess savings, and plan a retirement income strategy.
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 weren’t enough, they may face challenges like student loan debt or credit debt. 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 — typically debts close to 8% 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 a high-yield savings account.
Putting your money into interest-bearing accounts can help your money grow exponentially over time through the power of compound interest. Compound interest allows you to earn interest on the interest you earn as well as the principal, so higher interest rates can translate into higher savings over time.
Recommended: Planning your emergency fund? Our emergency fund calculator can assist you in setting the right target.
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Saving for Retirement
The earlier you start investing for retirement, the longer you can take advantage of the returns you may earn on your investments.
Compound returns refers to the gains investors may see on both their initial investments and any profits they may generate, assuming they’re reinvested. Unlike compound interest, the rate of return on investments can vary significantly depending on market performance, and investors may experience losses on their initial principal, as well. Over the long-term, however, a well-diversified portfolio has the potential to see substantial growth, and this is true of investments in retirement plans, as well.
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 401(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 may 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 preparing for college or 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 make 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 to determine when you’ll start withdrawing funds and how much you’ll take each month or year. You’ll also want to decide when to take Social Security retirement benefits. Delaying benefits until age 70 could increase the monthly payments you receive.
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.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
What primary savings goal should I focus on in my 20s?
The top priority in your 20s is building a solid financial foundation. This may mean creating a plan to pay off high-interest debt, establishing an emergency fund that can cover three to six months of living expenses if a financial emergency arises, and starting to save for retirement.
What are the benefits of starting to save for retirement early?
Starting to save for retirement early allows you to take full advantage of compound returns. While all investments are subject to the risk of loss, compound returns may lead to substantial growth over the long term. Even small contributions can grow significantly over decades, making it easier to meet your retirement goals.
Besides retirement, what other major savings goals should I consider?
Beyond retirement, important financial goals include building an emergency fund to cover unexpected expenses, saving for a down payment on a home, and setting aside funds for children’s college education. It’s also wise to regularly review insurance coverage to help protect your assets.
What should I consider when planning my retirement income strategy?
The first step in planning your retirement income strategy is to assess how much you have saved. You may need to adjust your contributions to your retirement accounts or other investments to help you reach your goals. You should also decide when you want to start withdrawing money from your accounts, along with when you want to start taking Social Security benefits.
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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider 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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
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