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hey what's up everyone and welcome to the school of personal finance one of the favorite questions that I get asked is how much money should I have saved at this point now people love to compare what they've done to what their friends have done there people in the same age group as them so I thought it would be a good idea to talk about the different ages and how much you should have saved at each point alright let's get to the numbers Thanks so it's hard to put a number to an age as far as how much you should have saved at that point there's so many different factors that go into it a big one being where you live currently in the United States like in New York you need to have a lot more money saved if you want to stay there compared to if you want to live somewhere in the Midwest then there are other things like are you gonna have the pension when you retire and get older because if you're gonna have a pension then you could actually have a lot less saved right now compared to somebody who does not have a pension another big variable is how you're currently saving if all of your money are in pre-tax accounts like 401ks and traditional IRAs then you need to save more compared to somebody who's saving all of their money in Roth 401 KS and Roth IRAs so there are many different factors I have friends that all they do is invest in real estate so they really don't have any money in retirement accounts but they own a ton of homes and they get an income from them from those homes so everybody's a little bit different and it depends some people also live and much more expensive lifestyle maybe they live and it takes them $12,000 a month to get by where other people could live on $4,000 a month so all these things play a big part and it makes it very hard to compare how much you've saved compared to somebody else and how much they've saved let's start by looking at some of the actual statistics that are out there so fidelity believers the second quarter of 2019 they updated their numbers to show what the median amount and also the average amount that people have had had saved in their retirement plans for the different ages so if we go ahead and take a look at this for the 20-somethings out there between the ages of 20 and 29 the average 401k balance is $11,800 in the median balance is $4,300 if you start saving aggressively during this decade you put yourself in such a great position going forward because you have that time value of money and that compounding effect where your money's gonna grow for many many years to come so I urge you if you're in this age group just do whatever you can to start just get rolling get plowing money in there because it makes such a huge difference later on but your 20s it's a critical decade as far as how the rest of your life is going to play out when it comes to saving and investing and debt it's really an important time but it flies by so the best thing you could do is to just start contributing try to do as much as you can to where you feel the pain where it's painful to put that much in there and try to live on less you'll be happy later on that you did so all right so let's take a look now for people in their 30s and how much they have in their retirement accounts so the average 401k balance forty two thousand four hundred the median balance $16,500 and contributing seven point eight percent of their income so you know the numbers get better in this decade but it's still not very pretty so at age thirty fidelity says that you should have at least half of your salary saved for retirement at that point so if you're thirty years old you're making 70 grand a year you should have thirty five thousand dollars in retirement accounts so I'd like to calculate it a little bit differently I think it's better to look at it in terms of your living expenses and use it as a multiplier of that so at age thirty I think that you should have at least one times your living expenses inside of retirement accounts so let's assume that it costs you four thousand dollars a month to live at age thirty that's forty eight thousand dollars a year I think that's how much you should have in your retirement accounts at age thirty and now I think it's super helpful when you play around with numbers and we you know look at what you might need in retirement and try to work our way back and see how much you need to have saved at certain points and how much you need to be contributing so for a 30-year old let's just make the assumption that you're gonna want to retire around the age of 63 so that is thirty three years that you have to go to retirements you're gonna need a lot of money thirty-three years from now to be able to have the lifestyle that people today are having when they retire the dollar things are gonna look very different thirty-three years from now how much you could buy with a dollar so I use the goal of two million dollars is what you should want to have saved thirty three years from now so if you're thirty years old you want to retire at 63 I think two million dollars is a decent number to shoot for as far as saving for retirement and I'm not even taking it to consideration you know if you're gonna have a pension which most people aren't and Social Security which is a huge wild card so when we factor in inflation two million dollars thirty three years from now it really only has the same purchasing power as seven hundred and fifty thousand dollars does today so that's kind of eye-opening that you really need two million dollars thirty three years from now in order to be able to have seven hundred and fifty thousand dollars worth of purchasing power today the same is somebody retiring today having seven hundred and fifty thousand dollars that's a pretty scary thought when you think about it so let's play around with some numbers and see what it would take for you to get there let's make the assumption that at thirty years old you have 25 grand saved them retirement account and that you are investing pretty aggressively and that you could get a seven percent rate of return in your retirement accounts year after year over the next thirty three years if that is the case then you need to start saving about fourteen thousand dollars a year so that's a pretty big number and this goes you know if you're a family if you're married at this point between husband and wife the fourteen thousand dollars a year going into retirement accounts if you've currently saved twenty five thousand dollars and you're around thirty years old now if you've been able to save up to fifty thousand dollars at that point and you're gonna earn seven percent and you're gonna retire at sixty three the number that you need to save each year goes down from 14,000 down to twelve thousand dollars a year so still not a huge difference right but it is a difference it's a thousand dollars a month basically that you need to be saving over the next thirty three years to get to that two million dollar number and now again remember that as time goes on salaries go up so as we have inflation as you get older you're going to be earning much you're earning now so saving $12,000 a year 20 years from now it should be a walk in the park for you right now it would seem as a big mountain to climb and now just to show you how much of a difference it makes depending on the rate of return that you get how your investments actually perform if you have $50,000 saved now at age 30 and you could earn 10% each year then you only have to save around $3,400 each year going forward to get to that 2 million number 33 years from now so that is a opening in of itself it's very hard to get a 10% return over a 33 year long period so 7% is a much safer assumption even if you invest very aggressively getting a 10% rate of return it's not an easy thing to do and most people don't achieve it because they end up tweaking things and doing things at the wrong time or they end up earning much less than that and then just to show you how it could go the other way also if you have 50 grand saved now at age 30 you could only earn 5% per year say you're scared of the market you invest very conservatively you have an average rate of return of 5% over the next 33 years in that case you need to be saving $21,000 a year each year up until you retire so that makes a tremendous difference that is a big number and it's eye-opening how big the difference is between if you're earning 10% a year you only need to save $3,400 a year where if you're earning 5% a year you need to save $21,000 a year that seems pretty crazy all right so let's go to our 40 year olds now so according to fidelity they believe that at age 40 you should have two times your annual salary saved in retirement accounts now for me personally I think it sounds low I think that is a minimum amount that you want to have I'm more comfortable again going by what your annual expenses are so I think that you should have four times your annual expenses and retirement savings when you're 40 years old so again if it costs you $60,000 a year to live then you should have two hundred and forty thousand dollars saved in retirement accounts now if these numbers sound you know crazy high and super scare you're sitting there thinking I'm 40 years old and I'll have anywhere near that it's okay you know going through this I'm not meaning to scare you or to make you nervous or make you feel bad about yourself if anything I just want to open your eyes so what the reality is because the shortfall and retirement savings in this country is crazy right now so it is serious you really do need to be plowing money away for retirement for your own good so you could enjoy your later years in life we said with a 30 year old that the goal would be to get to about two million dollars by the time they're 63 now if you're a 40 year old then the goal is going to be to get somewhere around one and a half million dollars by the time you're 63 just because you have ten years less of inflation the dollars going to be worth more and when the half million is a number that I feel comfortable with telling you that you would need in retirement to be able to live a decent retirement so if you're 40 that's 23 years away let's assume that you've done a good job saving and that you have 250 grand in retirement accounts at that point at age 40 if you want to get to that one and a half million dollar number and you invest you get a seven percent rate of return then you would need to save about six thousand dollars a year from that point so not too bad that is definitely doable and if you're at that point then you could probably do much better than that so again just to show some differences so instead of getting a seven percent rate of return let's say that you only get a five percent rate of return and now instead of needing six thousand dollars a year you're gonna need to save seventeen thousand dollars a year so again just to show you just to open your eyes that the rate of return that you get on your investments it makes such a huge difference so going from seven percent a year down to five percent a year over the next 23 years that makes such a huge difference in how much you have to save every year instead of saving 6,000 you now need to save 17,000 and the kicker is that you don't know how it's going to perform so you want to invest aggressively so that you're able to get that higher rate of return you have to be able to stomach the swings that you're gonna have now if you're watching this and you're 40 years old and you only have like $100,000 save for retirement then the number turns into you need about $19,000 a year going into these retirement accounts going forward at a 7% rate of return again that's a difference between $6,000 and $19,000 depending on how much you've saved up until this point and back to inflation if you could get to that one and a half million dollars at age 63 that's about the equivalent of somebody retiring today with $750,000 so the cost of inflation prices going up you're in the year out at about a rate of 3% that eats away at the amount that you've had that you have saved that well you could buy with that one and a half million dollars all right so let's talk about 50 years old so for 50 year olds fidelity says that you should have four times your salary is saved in retirement accounts so you make a hundred grand a year you should have four hundred thousand dollars in your retirement accounts I say you should have eight times your annual expenses in retirement accounts by age fifty in that ballpark and if you're 50 years old and you want to retire at age 63 that's 13 years from now then I think you need to have around 1.1 million dollars in retirement accounts to be at the equivalent of somebody retiring today with 750 thousand dollars so let's make the assumption that you've done a very good job and that you've saved 500 grand in your retirement accounts by the time you reach 50 years old if that's the case and you that are in the 7% rate of return then you actually don't even need to contribute any more in order to hit that goal of 1.1 million at age 63 you would actually have 1.2 million dollars in your account just from the compounding of the 7% return now if at age 50 you only have $250,000 saved at that point then it's going to be a struggle then you have to save about $23,000 a year just to get to that number of 1.1 million 13 years from now so that's not going to be an easy thing to do and now when you're 60 years old according to fidelity you should have six times your annual salary saved in retirement accounts I think you want to have about 12 times your annual expenses in retirement accounts and now six years old you know you're right up against it if you're looking to retire at age 63 but you know the last decade of time before people retire they do really plow money into these retirement accounts you have catch-up provisions where you could contribute more to 401ks and IRAs and people really tend to you know hit the accelerator during that time to try to plow them on the end but the funny thing is for all you young people out there if you just start very early putting money in at a very young age that's what's making what makes the biggest impact it's not hitting the accelerator at the end it's by doing it at the beginning because then you have all those years of compound growth so the biggest takeaway for you and your 20s and early 30s out there hit it hard now do whatever you can to try to plow money into those accounts because it's gonna make a huge impact as you get older all I wanted to do with this video was give you an overview of what it all looks like throw some numbers at some different ages for things you should be shooting for but don't feel bad if you're not there you have time to get there just work hard at doing it get your ducks in a row start saving as much money as you can for the future so you could have a happier less stressful life it gives you options if you do want to retire kind of early change careers do something it'll help you out so hopefully you found this video helpful please hit that like button if you've not done so already subscribe to my channel I will see you again in my next video thanks a lot