Retirement Savings: Milestones to Reach by 30, 40, and Beyond

Saving early could set you up for a more comfortable retirement.

It’s never too early to start saving for retirement, and the sooner you start, the more likely you are to reach your retirement savings goal when you’re ready to leave the workforce. To help you stay on track, it may be helpful to set goals as you go.

Since everyone’s financial situation is unique, your goals may not be the same as other people in your job or in your age group. However, there are some general guidelines you could measure against to help you feel more in control of your savings.

Let’s dive into a few common guidelines about retirement savings to help you better set realistic savings goals.

This information is not tax or investment advice. You should consult with a tax advisor and/or a qualified investment professional for advice specific to your particular circumstances.

Key Takeaways

• The earlier you begin to save for retirement, the bigger your gains are likely to be over time, due in large part to compounded earnings.

• Some of the most common tips for saving for retirement include putting away 15% of your salary and having 1X your salary saved by 30.

• Revisiting and adjusting your retirement savings plan throughout your life may help your savings grow more efficiently.

Retirement Saving Strategies

While you’re free to use whatever savings method you want to build your retirement fund up, there are some strategies that have been proven to make setting money aside easier. Here are some of the top options to consider using yourself.

The 15% Rule

Many experts recommend putting 15% of your pre-tax earnings into a retirement fund each year. This percentage could put you on track to have enough savings when you retire while also leaving room for other financial goals like buying a new home or paying off student debt.

That number may feel daunting, but it’s not as scary as it might seem. Say you have a 401(k) retirement account through your employer and are putting 5% of your paycheck into your account each pay period. If your employer matches your contributions, you’re actually setting 10% aside.

Keep in mind that the 15% rule is just a recommendation. Just getting started, contributing what you can afford to your 401(k), is a step in the right direction.¹

Age-Based Goals

If the thought of putting a set percentage into your account feels overwhelming, you could instead focus on meeting age-based savings goals. Many experts recommend having at least 1X your salary saved in a retirement account by age 30, and then increase those savings every five years. The chart below shows how this could work if you plan on retiring by age 67.

Remember, this is just a guideline. As your needs and goals change, you may want to set more money aside to increase the chances of having enough money when you actually retire.

Invest and Take Advantage of Compound Earnings

Experts advise starting your retirement savings early to give your savings more time to benefit from compound interest, typically resulting in higher earnings.

The table below shows how much a person with a $100,000 annual salary would have in their retirement savings at age 65 depending on when they start saving and how much they set aside.

This table doesn’t account for salary increases or adjustments in savings over time and assumes an average annual return of 6%.²

Tips for Growing Your Retirement Savings

Your retirement savings shouldn’t be a set-it-and-forget-it plan. Revisit your plan and reevaluate your goals regularly. This way, you’re able to make adjustments as your life changes, whether that’s due to a salary increase, a growing family, or a change in your living situation.

There are a few things you may want to do to help stay on track.

Revisit Your Contributions Often

It’s likely that your income will increase over the course of your career. Use this to your advantage and increase your contributions as your income goes up.

Ideally, you should be maxing out your 401(k) contributions each year. And if you are, consider opening an Individual Retirement Account (IRA) to help you set more money aside and consult with a tax professional to see if you could take advantage of additional tax breaks.³

Review Your Investments

Both 401(k)s and IRAs are types of investment accounts. You may want to review your investment choices regularly to make sure your money is going into funds that align with your goals and risk tolerance.

Investments are a personal choice, and different types have different levels of risk associated with them. You may want to invest in higher-risk/higher-return investments when you’re younger to take advantage of your ability to recoup losses should the investments not perform as you think they will. And as you get older, you may want to invest in lower-risk/lower-return investments to maintain as high of a balance in your accounts as possible.

It's always good to discuss your options with a financial advisor to learn about the best asset mix for your account and goals.⁴

Use Catch-Up Contributions

Catch-up contributions let individuals who are 50 and older further boost their retirement savings. The exact amount you may contribute varies from year to year.

In 2024, individuals 50 and older may contribute an extra $7,500 to their 401(k) account and $7,000 to an IRA.⁵

Final Thoughts

Starting to save for retirement as early as possible helps you to take advantage of the power of compounding… potentially providing an exponential difference in your total savings by the time you retire. Your goals will likely change over time, and reviewing your contributions and making adjustments as you age is an important practice to start young as well.

Keep in mind that you may want to save for more than just retirement. You could put your money to work by opening a high-yield savings account that earns competitive rates.

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