How Much Savings Should I Have Accumulated By Age?

High Above HonoluluIf you want to achieve financial independence, you’ve got to implement a savings routine. I don’t want to hear excuses as to why you can’t save if you want to be free. Go somewhere else please. If you are serious about living life on your own terms, study my recommended savings chart carefully.

Your savings rate should increase the more you make. To do this, you’ve got to spend at a slower rate than the rate of your income increase. I’m trying to use realistic numbers here so that folks don’t overly bitch and moan. I started saving 50% of my after tax income when I began earning more than $60,000, so please, save your excuses for the government instead.

Savings amounts are important, but what’s more important is your expense coverage ratio given everybody has different lifestyles. In other words, how many years (or months) of expenses can your savings cover in case your income goes to zero? Given nobody can work forever, we must increase our expense coverage ratio the older we get because we will have less ability to earn. At this point, it’s time to start drawing down our savings.


Recommended Savings By Age Chart Financial Samurai

I recommend everybody start off with 10% and raise their savings amount by 1% each month until it hurts. If you’ve ever had braces, you get the idea. Keep that savings rate constant until it no longer hurts, and start raising the rate by 1% a month again. If you make more than $200,000, certainly shoot to save more if you can. You can theoretically achieve a 35%+ savings rate in two short years with this method!

Please note that I am making 401K and IRA contributions a priority over post-tax savings. The reasons are: 1) we have a tendency to raid our post tax savings, 2) tax free growth, 3) untouchable assets in case of litigation or bankruptcy, and 4) company match. Obviously you need some post-tax savings to account for true emergencies. Ideally, my goal for everyone is to contribute as much in their pre-tax savings plans as possible and then save another 10-35% after tax.

The maximum 401k contribution for 2015 is $18,000, up from $17,500 in 2014. The maximum pre-tax contribution will probably increase by $500 every two years or so if history is any guidance.


The below chart is an expense coverage ratio chart that follows someone along a normal path of post college graduation until the typical retirement age of 62-67. I assume a 20-35% consistent after tax savings rate for 40+ years with a 0-2% yearly increase in principal due to inflation. The other assumption is that the saver never loses money given the FDIC insures singles for $250,000 and couples for $500,000. Once you breach those amounts, it’s only logical to open up another savings account to get another $250,000-$500,000 FDIC guarantee.

Expense Coverage Ratio = Savings / Annual Expenses

Retirement Expense Coverage Ratio

Note: Focus on the ratios, not the absolute dollar amount based on a $65,000 annual income. Take the expense coverage ratio and multiply by your current gross income to get an idea of how much you should have saved.

Your 20s: You’re in the accumulation phase of your life. You’re looking for a good job that will hopefully pay you a reasonable salary. Not everybody is going to find their dream job right away. In fact, most of you will likely switch jobs several times before settling on something more meaningful. Maybe you are in debt from student loans or a fancy car. Whatever the case, never forget to save at least 10-25% of your after tax income while working and paying off your debt. If you have the ability to save 10-25% after tax, after 401K and IRA contribution up to company match, even better.

Your 30s: You’re still in the accumulation phase, but hopefully you’ve found what you want to do for a living. Perhaps grad school took you out of the workforce for 1-2 years, or perhaps you got married and want to stay at home. Whatever the case may be, by the time you are 31, you need to have at least one years worth of living expenses covered. If you’ve saved 25% of your after tax income for four years, you will reach one year of coverage. If you saved 50% of your after tax income a year for five years, you will have reached five years of coverage and so forth.

Your 40s: You’re beginning to tire of doing the same old thing. Your soul is itching to take a leap of faith. But wait, you’ve got dependents counting on you to bring home the bacon! What are you going to do? The fact that you’ve accumulated 3-10X worth of living expenses in your 40’s means that you are coming ever close to being financially free. You’ve hopefully built up some passive income streams a long the way, and your capital accumulation of 3-10X your annual expenses is also spitting out some income.

Your 50s: You’ve accumulated 7-13X your annual living expenses as you can see the light at the end of the traditional retirement tunnel! After going through your mid-life crisis of buying a Porsche 911 or 100 pairs of Manolo’s, you’re back on track to save more than ever before! You are 100% in tune with your spending habits, therefore, you raise your savings rate by another 10% to supercharge your final lap.

Your 60s: Congrats! You’ve accumulated 10-20X+ your annual living expenses and no longer have to work! Maybe your knees don’t work either, but that’s another matter! Your nut has grown large enough where it’s providing you hundreds, if not thousands of dollars of income from interest or dividends. Full Social Security benefits kick in at age 70 now (from 67), but that’s OK, since you never expected it to be there when you retired. You’re also living debt free since you no longer have a mortgage. Social Security is a bonus of an extra $1,500 a month. You’re budgeting a couple thousand a month for health care as you plan to live until 100.

Your 70s and beyond: Sure, you’ve been spending 65-80% of your annual income every year since you started working. But now it’s time to spend 90-100% of all your income to enjoy life! They say the median life expectancy is about 79 for men and 82 for women. Let’s just bake in living to 100 just to be safe by taking your nut, and dividing it by 30. For example, let’s say you live off $50,000 on average a year and have accumulated 20X that = $1,000,000. Take $1,000,000 divided by 30 = $33,300. You’re getting another $18,000 a year in Social Security, while the $1 million should be throwing off at least $10,000 a year in interest at 1%. If you’re interested in retiring early, here’s a more aggressive savings strategy for you.

Important Note: Obviously no one ever knows what might happen to provide a boost or a drag to their finances. Maybe you get lucky with a great new job offer or invest in the next Apple Computer. Or maybe you get laid off at 40 and can’t find work for two years. My chart above merely serves as a savings guideline. Work to build alternative income streams in the meantime.


The only way to reach financial independence is if you save and learn to live within your means. National average money market accounts are yielding a pitiful 0.1%. In fact, I keep about 90% of my saving in online CDs and savings accounts to prevent me from having the temptation to spend. Depositing and withdrawing money is easy, and the interest rate is obviously way higher than a bricks and mortar money market account. The other great reason to keep money in an online savings account is to protect yourself from your temptation to spend.

For the money you are comfortable risking, actively invest the rest of your after-tax savings in real estate, the stock market, structured notes, P2P lending, and basically anything else that matches your risk tolerance. The point is to gradually expand your savings into investments where you feel most comfortable. Many people, including myself, love real estate because we can see what we are buying.

It’s important to then track your investments to make sure you’re comfortable with your positions. I highly recommend signing up for Personal Capital, a free online wealth management tool that let’s you easily monitor your finances. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into one place to see how my stock accounts, how my net worth is progressing, and whether my spending is within budget.

One of their best features is their 401K Fee Analyzer which is now saving me more than $1,700 in portfolio fees I had no idea I was paying. They also have a fantastic Investment Checkup feature that screens your portfolios for risk.

Finally, they came out with their incredible Retirement Planning Calculator that uses your linked accounts to run a Monte Carlo simulation to figure out your financial future. You can input various income and expense variables to see the outcomes. Definitely check to see how your finances are shaping up as it’s free.

Retirement Planning Calculator

With the ever presence of inflation chipping away at your wealth, it’s important to stay proactive with your finances. If you stay consistent with your savings habits, you are going to wake up 10 years from now and be amazed with how much you’ve accumulated.

Photo: View of Diamond Head, Honolulu, HI. SD.

Charts completely updated on 7/14/2015.



Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

You can sign up to receive his articles via email or by RSS. Sam also sends out a private quarterly newsletter with information on where he's investing his money and more sensitive information.

Subscribe To Private Newsletter


  1. Barbara j says

    I have been reading your savings suggestions. These sound good except in this economy and years past, very few people were making 65k. I worked for the better part of my life at 35-40k. I saved what I could most now gone due to layoffs one right after another. Getting behind and playing catch up kills your saving potential. It’s taken me to the age of 59 to finally make 65k. I’ve managed to rebuild my savings to about 10k in 401k. I plan to work at least 10 more years. Ill save what I can but it’s a little too late to accumulate what you suggest. I venture to say there are a lot of people like me, hurt by the economy now left out in the cold. The problem with people like you is you don’t factor in the average wage earner. What you and others like you preach are for those who have the ivy league jobs right out of college. Where we’re you 30 years ago.

    • says

      Sorry to hear about your circumstances. I hope this article can inspire those who still have a lot more time.

      30 years ago I was trying to get good grades to give myself a chance at getting into a good college to get a good job.

      • Sue says

        I went back to college and graduated with a bachelors at the young age of 34. I worked aggressively at paying off debt. Well the first job I got was a lucky one. I went to work for one of the repositories, or aka, credit bureaus. I learned how to earn credit with minimal income and debt/credit ratios. This has helped me saved thousands in every big purchase, ie. cars, real estate, loans, etc over the years and contribute more to retirement and 401K’s. I do make 6 figures now, but not without layoffs and proper managing. Saving anything you can and it will pay off! God Bless

    • says

      Don’t give up hope. Just do what you can to cut expenses and make a little money in retirement. Try to enjoy the free things in life. Good Luck!

      • says

        Really? Is this article geared towards people who live home and rent free and have no kids or kids with special needs? What about home maintenace and property increases that go up constantly? I always lived within my budget. But you can’t even save that much unless you have a second job. Oh… and I forgot, most of us, even the professionals, do not see a 3 percent increase! Most of us have gone at least six years average without a pay increase.

        • G says

          I’ve gotten a pay raise of 5% every year like clockwork. If I don’t get it from my employer, I go to another firm.

          I’d recommend you be more aggressive about growing your salary.

          And as for the rest… If you can’t afford your lifestyle, whose fault is that? Adjust it. Bring it back down to where you can afford to save.

      • Miami-sid says

        “Worthless Federal Reserve notes…” Except you can trade this “worthless” material for a nice dinner, a good car, reasonable shelter AND a comfortable retirement. Worthless? Nonsense.

  2. says

    I am 27 yrs old. I don’t own any stocks, not have I invested in anything. Besides saving, what is the first step I should take to see any kind of money grow before I hit 40? Please note, I have not been very well educated on how I can make sure I’m taken care of by the time I’m elderly (based on my own actions).

  3. gman says

    I have a question. I am 45 years old and have about 900K in savings total. I own my own business so my income is not really set per say. Last year I was taxed on about $400,000 but I would say I brought home around $250K (maybe a bit more). Also I have just gotten married and my wife makes 50K per year, so in a way I am supporting 2 people now at my present life style. She maybe has 14K in a IRA. In the past I never worried about a set amount for savings as I made enough to just put away a lot of money. I would say in the last 5 years I saved around 60% of my income (thus the 900K). I don’t think I will be able to do that now due to the money being for 2. My thought was to put around 100K per year total from here on out into savings. Does that seem to be enough? One other thing is we are going to buy a new house and thinking of just paying cash (around 400K) so that will bring my savings down to around 500k but will own my house out right. Thanks for any kind of advice.

  4. Babets says

    Hello FS and thank you so much for your very informative posts.

    I am intrigued by this article among others, and this lead me to a question for you.

    In my case I am ok with savings in % vs my salary, and aligned with you.
    However when it comes to the chart of how much cash you should have accumulated by a certain age, i get a bit “worried”. In my life i bought 2 houses and renovated them both. Pretty safe investment in terms of locations. In 1 i have no mortgage, in the other one I have a mortgage very manageable providing i keep my job…
    The choice of houses vs cash left me with “only” savings of 30x my monthly need (i am in the 40/45 year old range) and a small 401 k that should reach at least 1 mil $ by age 65.

    Should i sell 1 house in favor of having more cash to invest (600k approx) or just sit tight in your experience?

    Thank you in advance

  5. Trish says

    So how do you handle putting your kids through college? We saved a lot but not enough to put two kids through 4 years of college, and how do you continue saving while doing this?

    • dasmb says

      A quick note about college savings — any money you put into a college savings plan or a standard savings account (MMA, checking account, etc) or into savings bonds counts as money you COULD be putting towards college as far as needs scholarships and subsidized loans are concerned.

      Money put into a 401k, IRA, invested in your main home or used to purchase whole life insurance doesn’t count as an asset towards these calculations. What’s more, 401k contributions decrease your AGI, which is used to determine elligibility.

      In short: if your income is middle class and your liquid savings modest, you might qualify for more college help if you don’t save for college than if you did.

      Now I’m not saying “don’t save.” I’m saying max out those retirement accounts! Even though they aren’t considered assets for college, you can use money in them to pay for college tuition without penalty. A 529 can ONLY be used for college — if your kid decides to go to trade school or gets a full ride on a curling scholarship, the money is wasted (though you could use it yourself to go back to school).

      What’s more, a 529 isn’t really going to generate a big return due to compound interest — the average dollar put into it will only be in the market for 9 years — and it’s post tax money.

      In the worst case scenario, where the kid doesn’t get any money for college, you always have the option of taking 4 years off from investing for retirement and plowing the money instead right out of your paycheck into school costs. You will take a hit, but it’ll be offset by the years of not splitting your investments when it mattered.

      In the event of a loss of cabin pressure, adjust your own gas mask before you adjust those of your children. That advice applies to finances as well.

      • Rob says

        Is this really true though? It is my understanding that only your “contributions” count in the college help eligibility and that any gains do not. You also get the advantage that the gains are tax free. If your child does not use the money for whatever reason, and if you cannot pass to another child in the household or hold for their future children, then you can withdraw for yourself for a 10% penalty. I still see some advantages.

  6. Mark says

    I am 52-years old an have almost $900K saved. I have a tax-deferred 401K with close to $390K, two tax-deferred annuities, which I most recently opened (to avoid my 28% tax bracket) with close to $405K, plus a bank CD account with another $105K earning 2.96% with an APY of 3.00%.

    But that’s still not it – The best news – I am practically DEBT FREE. That’s correct, debt free – My two-bedroom, two-bathroom condominium is paid off in full, I have no mortgage; my 2010 Honda Civic Hybrid is paid off in full, my student loan (from many years ago) is paid off in full, and my credit card debt is paid off each and every month.

    My only expenses are medical (I do have lung / respiratory issues), annual property taxes, monthly condominium maintenance fees + monthly utility expenses.

    I guess it’s safe to say I am doing pretty well, allthough I am slightly concerned about my overall health. I am a former cigarette smoker and come from a family history of ALL smokers. I do have early stages of COPD, but since I quit smoking, I am hoping my COPD does not progressively get worse. Medical expenses are outrageously high, although I do have medical insurance. But this HDHP (high deductible health plan) really stinks. I am also putting money aside via a HSA (health savings account).

    With my condominium, automobile and rare collectibles, I would venture to say I am already in the “millionaire’s club.” Yet, at 52-years old, I am still working for a Fortune 500 company because I am single and really do not have anything better to do with myself. I am already well-traveled. I have traveled extensively both here at home (in the U.S.A.) and abroad (Europe and the Middle East).

    Guess it’s safe to say, “Life is Great !!”

    • Kickick says

      That COPD is going to get you. You have 10 years left at best. Retire spend it down to zero over the next 10 years and quit that stupid job now!

      • Andrew says

        That’s horrible advice. Not sure who the above poster is but I’m a respiratory therapist, and COPD is by no means a life sentence. It’s manageable, even when it gets progressively worse. If you enjoy work, keep doing what you’re doing, and save modest amounts just like you have been doing. Life without health is a life disadvantaged but not a life not worth living.

        Silly rabbit, tricks are for kids.

      • Miami-sid says

        “That COPD is going to get you. You have 10 years left at best. Retire spend it down to zero over the next 10 years and quit that stupid job now!” And if ten years from now this individual is living well with COPD your advice would be …..? Those folks [such as yourself] with a “live for today” philosophy hurt us all.

  7. greg goetsch says

    My mother is 80, lives in one of the cheapest places in the country, makes 60k a year between social security and a guaranteed dividend (until she dies) from charitable gift. She also has about 500k in a mutual fund. She is considering buying my family a house as a gift. How much of the 500k should she keep for a rainy day at her age with a guaranteed income of 60k. She easily lives on the 60K and has little desire to buy expensive stuff or go on trips. I can’t see that she really needs much savings.

  8. greg goetsch says

    Actually, I don’t think the question or the answer depend on me at all. I was asking a financial question about how much SHE needs for her retirement savings/income at her age. But because I since judgement about my side of things, let just replace “buy house” with “give to worthy charity.”

    • says

      It’s hard to know the future b/c of rising medical costs. If her insurance is in place for LTC and such, only she can answer the question comfortably. I’d just ask and then add on a buffer just in case.

  9. Raul says

    I am 23 years old and will make about 35 k (after taxes) after my first year(June). Im in a sales position and should be increasing so that by year 3 i am at about 60-70 k after taxes. Im looking to invest i am opening a 401k and my company is going to start matching. I do have some expenses coming up like a new car purchase but any general or specific advice. I am pretty good at saving my expenses are about 1400-1500 a month bc of a car payment i have to help my parents on. Without the car payment that ends in June ill be at 800-900 a month. I am just young and looking for direction

    • Miami-sid says

      You currently have advantage a lot of us no longer have: time. Consider contacting one of the two big low cost family of funds [Vanguard or Fidelity] and review their index funds. Put aside and emergency fund [about 6 months living expenses] in a Bank CD. Then invest the rest in a low cost index fund. Your assets in the index funds will go up and down over time but the with compounding it most certainly over time will increase dramatically.

  10. fahzybear says

    How is this possible if you live in an area where average rent for a 1 bedroom studio is $2000? I live in SF where i Make 60K but over half my paycheck is going to rent.

    • says

      Definitely not easy in SF (I live here too).

      How about finding a roommate? Savings is a choice. I lived in a studio with another fella for two years. I figured it was like a luxurious dorm room, and I was able to save 40% of my income in Manhattan making $40,000 a year.

      • says

        I also live in SF (not city proper) — and yes, get roommates. Move to the East Bay or cheaper cities on the Peninsula or just get a lot of roommates in the city. You can definitely spend less on rent that way. And make sure to always negotiate for higher salaries given the cost of living in the area.

      • Anon says

        This here is the problem. Although I understand the need to save, having to degrade my quality of living to the point where I am SHARING a room with someone in a studio is just simply ridiculous. I had a problem doing that my freshman, soph, and junior years until I was able to have a place with my actual own room.

        I make 65k a year pre-tax currently. Not possible to save 35% pre and post tax and still enjoy nightlife and not being poor, especially if you have loans to pay back. I have lived in NYC my whole life.

        I sincerely believe that the only way to make those kind of savings in a city like NYC (forget about Manhattan/Upper Brooklyn, I’m even talking Queens and the rest of the “affordable” city) at my kind of pay rate requires the need to have mommy and daddy behind the scenes supporting you either directly or indirectly.

  11. says

    So, wife and I both 58, with combined DC balances of 1.4m
    wife to start pension of about 36k per year at age 65
    expect combined SS of about 53k at age 70.
    Currently making 165k combined, before taxes and savings
    small mortgage
    want to retire in four years.

    What do you think our chances are?

  12. PD says

    We make $330K combined, have $285K in 401K, 150K in investments, and about $500K in home equity. No student loans, minimal debt – but we do pay child care, college savings, $15K car loan. We are 37 years old and I feel like in a position to make this money bigger, but not sure how. Are we sitting on too much home equity? Any advise?

    • Mary says

      A lot depends on how much you spend. Based on your current situation, if you can keep saving just 10% for 25-30 more years, your retirement and investments combined should get you to a comfortable retirement. I use compound calculator to run different scenarios. Plan on spending no more than 4% of your total saved amount per year. We will have to adjust as we go, based on the economy. (This is why I have started investing heavily in dividend paying stocks – dividend aristocrats who pay set amounts consistently, regardless of their stock price.)

  13. Walt says

    So I’m a little bit concerned about my future. I’m almost 30 years old. I work for a university almost solely for the tuition benefit. I served in the Army and used my Post 9-11 GI Bill and TA to get my bachelors and master’s degree. They’re both paid off. The university that I work with pays 50% of my tuition, the other half was paid by the GI Bill. I went back to school- why not? I hope it will pay off later, but as always, no guarantees. I only have one semester left of GI Bill eligibility, which means that I will have to come up with $16,000 spread out over 2 years to finish my PhD in education (not a high paying field). Should I take out a college loan if I feel I can cover it?
    I make 47,000/year. I have about $16,000 cash, with an additional 50,000 in stocks in mutual funds. My employer contributes to a retirement fund. I’ve only worked for the uni for 2 years. I have another year before I’m vested and there’s not much in the account. I have another 10,000 to pay off for my car loan. I live in a city with a high cost of living. I’d like to buy a home in the future but I’m not there yet financially. I want to be able to retire comfortably someday but I’m not accruing money at the rate I feel I should be. I left the army to take care of my terminally ill parent. She’s since passed away. I’ve managed to erase the debt from that, at great costs- wiping out everything I had saved from the military. Is there anything I can do to make things better? I work full time and I’m a full time student- it’s pretty stressful. I want to be proactive and set myself up for the future, but I feel like I’m missing something.

  14. Dan says

    I’ll be 30 in September and I have always been interested in saving for the future. Depending on Social Security seems fruitless and the emphasis for saving for the future is growing by the minute. I work for a University and make about $60,000. My intention is to increase my 401k contribution by 1% each year (retirement contribution is at 13% with the University contributing 6% of the total). According to Penn’s estimation, I should have just over $1M saved by the age of 65.

    My question for you is, what other revenue streams can I realistically expect to create for myself? I am about to get engaged, live in Philadelphia and want to buy a house. Is it a good idea to buy it, raise a family for 5 years, and then rent it out to pay the mortgage off and then have that revenue stream/asset? What other ways can I maximize my net worth and earn more money?

  15. Lindsey says

    I think you should consider paying off loans part of saving. A lot of us who are paying off student loans may not seem like we’re saving enough, but if you think about it terms of increasing your net worth, we really are.

    In my bracket, I’m supposed to be saving 25%. I’m saving 24%, but if I include loan payments, it’s 32%.

    I imagine this is true for a lot of people, including those who are much further under the “ideal rate” than I am.

    I’m also a little confused by your pre-tax/post-tax guidelines. Does the “savings %” only represent pre-tax? And is pre-tax only including 401ks or Roths too? (I know Roths are post-tax, but there’s also tax benefits on the other end.) I contribute 7% to my 401k (not counting match), 8% to a Roth, and around 9% to my savings account for an emergency fund/maybe eventually for a down payment on a house in the distant future/etc. (And another 8% to student loans.)

  16. Richard Nelson says

    My wife and I are 63. We’ve accumulated about $1.1M, about $1M in retirement accounts. We have zero debt and our net worth is about $1.4M. My wife was laid off 2 years ago but despite great efforts, she hasn’t found another job. I currently earn about $115K/yr. plus I’ve been getting a $20k/year pension from a previous employer. My wife will get a $5k/yr. pension when she turns 65.

    We’ve been to 3 retirement financial planners. The first, insurance salesmen, wanted us to use just about all of our money to buy equity index annuities. The second, a CFP that charges an hourly rate and doesn’t sell any financial instruments, suggested we keep about 3 years of living expenses in a liquid account, and about 50/50 of the rest in equities and bonds. The third, someone at a large investment company, recommended a balanced portfolio, offered to manage the whole thing for .25%/quarter. His company’s software indicated we could retire now, live off of my small pension and our cash until 66 and then begin to collect social security. The percentage chance of succeeding with this scenario is about 90% for the amount we need to live that included an assumed 3% average inflation rate.

    I so much want to retire (in 3 months) and the numbers are enticing. It looks doable, but of course we don’t want to outlive our money.

    Your opinion?

    • says

      Your 3 months will go by in a nanosecond! Given you can collect Social Security soon, have zero debt, and a $1.4 million net worth AND pension, you guys will be so fine. How old is the wife?

  17. Nick says

    I’m 30 years old, I have about 10k cash in a savings account. I make 36k a year before tax. I feel like i’m late in the savings arena but I hope I can catch up somehow. I plan on saving as much as I can every week for the next 5 years and hope I can increase my savings balance to 100k. Any advice anyone can give me would really, help I’m kinda worried about my situation. I wish I start saving earlier.

    • says

      I would work hard to get a second job, go to a competitor for a raise, or ask for a bigger raise at existing firm while being as frugal as possible.

      Raising your income is the biggest solution here.

  18. Brandon says


    I’m 20 years old and I have about 15K saved. I have the majority of my my money invested with a financial advisement firm and also in online CD’s and savings accounts yielding me about .90%. I make about 65k a year before taxes. I just wanted some advice on how to best use and invest my money given my age. Any suggestions on where to invest?

    • Miami-sid says

      @Brandon “I have the majority of my my money invested with a financial advisement firm…” At 20 years old you are in fine shape but with your current assets and age you really don’t need to have your money parked with a financial advisement firm. Their usual yearly charge is about 1 to 2 percent of your assets and that money is better invested directly than giving it to them. At your age being aggressive is a good idea [because of compounding] park about 6 months savings in a bank CD and put the rest in an index fund in one of the two low cost majors family of funds [either Vanguard or Fidelity].

  19. Jonathan says

    Great article. Unfortunately I wandered here because I took some horrible losses in the stock market on my savings account (not IRA). I’m going to be 29 in December and after my losses i’m left with the following: 20k Savings account + 41k IRA. My tax refund will go straight to my IRA account but is not factored in here. I make 70,000 (plus a free car) and put at least 1,000 away a month never a dime less and always more if possible. Also, I have no debt.

    A few questions:

    1) Does your expense coverage ratio include IRA/401 balances? I apologize but I reread this ten times and am not certain.

    2) Are you recommending to keep these savings separate from equity purchases? I want to purchase a home in 3 years and by then I expect my savings (not including IRA) to reach 56,000. I would put 20% down but couldn’t tell you the price range as I don’t know where my job will take me to next. Let’s say for argument sake I put 15,000 down. Does that draw from this ratio or is it factored considered it’s equity?

    Thank you!

    • Jonathan says

      To be clear…I will have 20k by years end (when I turn 29) and not at the moment. I’m at 16k with at least 1k to be invested until December.

    • says

      Hi Jonathan,

      The savings guide is a good reference to use for ALL savings, including your IRA/401K balances, after tax savings and investments etc.

      Equity is considered part of your net worth. Don’t let anybody tell you otherwise. However, one can’t 100% count on equity until it is stolen, so I would put a discount to that.

      I think you’ll enjoy this post on Saving And Investing with FS-DAIR.

    • Matt says

      Hi Jon,

      27 y/o here, bought my first house in 2013, with peers also buying around the same time. Just a few pointers that I and my peers wish we knew coming in:

      1) It’s obvious, but do your due diligence in researching home prices and where they might go for where you buy. This may be one of the largest, most highly-leveraged financial decisions you make in your life. Given the country’s 2008 experience, there’s still plenty of opportunity out there, but it’s nowhere near as safe as a home salesperson might tell you.

      2) This extends to the condition of the house. Make no mistake, fiduciary duty or not, real estate agents or Realtors can be biased toward making you buy anything and everything. One suckered a friend of mine into a contract on a black-mold-ridden house, and he ended up losing $5,000.00 in an earnest money deposit when he realized how bad black mold really was and pulled out.

      3) Don’t forget to factor in closing costs (going into that “discount” talked about by our financial samurai), and try to negotiate the seller into covering as much as possible (my lender let them cover up to 3% of the home value in closing costs).

      4) Interest rates: If they’re still super low (I had 3.5% on a 30-year fixed mortgage), definitely just put up the minimum down payment. Even with the required private mortgage insurance when putting less than 20% down, you can get a better return on your money in non-equity assets. This goes double since you’re young, in the accumulation phase, and can afford to invest in riskier assets (like me!)- don’t forget that we have more time to ride out the volatility and get to those long term returns. Take advantage of it!

  20. Kaye says

    Combine household income of 185k. We have about 150k combined in 401k and 40k in liquid.
    My husband is 43 and i’m 35 years old. We have two young children in child care.
    Our house note is 2700 a month (including taxes/insurance) and a 50k student loan.

    I am concerned we are not investing enough. Any suggestions

  21. Luciano says

    Hi! Thanks for the article, it is really informative and very helpful. However, I still wonder whether or not I am at the right place in my savings or not. I am 30, married, own a house, and both cars are paid off. Very little student loans between my wife and I, maybe 15K total. We have roughly 170K saved, between savings, 401K, IRA and stocks. Where does that put me in comparison to the population my age? Am I on the right track? Should I be doing anything else? Thanks for all your help!!!

  22. brian says

    Most people don’t really understand how investments work. Please do your due diligence and read how the stock market works. There are three key variables here, Principal, Rate of Return, Time. The MOST import variable is Time because that is something you can never get back. If you are young and have some money, go very aggressive (all stocks). I would also recommend moving everything out of a 401k into a roth ira conversion to avoid taxes in the future.

    Don’t do trading because your can’t beat the market, stick with indexes and sectors you understand. And also understand that you can make money even in down market with shorting and buying on the dip.

  23. Anonymous says

    I’m 25 and work as an engineering PhD student making $31k in Boston.

    -$0 debt (aggressively applied to scholarships till I got a full-ride for undergrad; worked to pay for the tuition until I got the entire bill covered; kept a GPA 3.97)
    -Save 70% a year 2014-2018 (I currently live on $10k a year, got to love beans and goodwill); my first year I saved 30% since rent costs were high (average)
    -no car (bicycle commuter), no house
    -2 years ago I opened an IRA now worth $15k
    -I have $13k in savings, another $15k in stock investments and $9k in checking
    -Entering grad school in 2012 I had $3k net worth; 2014 my net worth is $52k
    -At this rate I should have $112k in savings by the time I’m 28

    I would like to be able to buy my first house/apt in 2017 (as much cash down as possible; I hate borrowing), buy my first car (used & fuel efficient) in 2017, and have kids (3-6 total depending on circumstances) starting in 5 years (2019) at age 30 (I am a woman and anticipate having to take some time and income loss for this, so I want to be prepared. My entire professional career might in a worst case scenario only go till I’m 30 since the US is crappy for re-entry of the professional workforce for family leave, but I might be able to find the work-life balance (aka 30 hours max/wk + flexible leave) that I’d like if I’m fortunate. I know of only one prominent contemporary scientist in the entire world who became a professor after taking >2 years off for children (she took 8 for crying out loud!). I could be her someday, but it’s like a 1 in a 100,000 chance.

    Plan A: I think I could be lucky enough to skip post doc ($40k salary) and become a prof ($60 starting) which truly is my passion, even though this is somewhat rare today. With this optimistic plan, I would have saved ~$190k by the time I’m 30. The conservative option (post doc) would put me at ~$150k assuming I lived on $20k/year (which I consider well-off and comfortable by my standards)
    Plan B: If I really need to make more, industry would hire me at $100k with a PhD, but I don’t know if I would enjoy it. I would hypothetically have $270k by 30.
    Plan C: Quit grad school now (although I am happy where I’m at and am doing awesome, high impact research), work for a top consulting firm ($100k salary) selling my soul and saving 80% to amass over $500k in savings by the time I’m 30 and thinking about kids.

    In summary:
    Age 25: $52k
    Age 30 academic track: $150k-190k
    Age 30 industry: $270k
    Age 30 quit grad school & do consulting: $500k

    Am I on track even though I won’t be 28 until I have my phd and get a “real” job with benefits? Should I consider quitting grad school for financial reasons even though I love the cutting edge research I’m working on right now?

  24. Jesse norwalt says

    According to your way of doing it you put in a ton of work and you end up with enough to leave you with 60 k a year. That is not retiring with dignity. If you take that money and invest it in the s&p 500 you will average 10% every year. So let’s say at age 30 you decide it’s time to start saving for retirement. So you save 500 dollars a month which is 6k a year. That’s not unreasonable considering it’s about 10 of the average persons income. If you do this then by the time you are 65 you will have accumulated 1.7 million dollars for your nest egg. Also if your earning 1% interest on it that’s crap. There are steady dividend stocks that are at about 5%. So even if you wanted to be really conservative you could have revenue from that well over your average salary. Trying to save without the power of compounding interest in the stock market is much more difficult than if you use it. I like that your telling people to save money thou that’s a large part of the problem. Summary work smarter not harder.
    Source 18 year old investor

  25. cierra says

    my grandparents put $50 I a savings bound for me and I get it this year it stared in 2001 and I want to know how much I will get when they give me them?

  26. Anonymous novice says

    I am 41 yrs old with 2 kids that will be off to college in 6 years & 10 years.
    So far I have not been able to save much, have about $15K in savings and 2 mortgages from homes that I had bought but not able to sell. I have less than $200K in 401K since I have not been able to max out each year and have less than $10K in 529 plans for my boys. In addition, I have about 40K in credit card and car loans. Based on your chart, it is fairly impossible for me to reach the targets by age 45 or 50. Any suggestions for continuing to invest in the house or sell and shift to stocks or funds instead?

  27. Keith Sellers says

    Love your work. I have followed your advise (and others like you in the 70’s and 80’s). I am now 61 and retired. I appreciate people like you preaching about savings and doing without now so we will have more later (made me not feel like a freak as I was putting 25% of my pay in savings all those 28 years of working).
    Keep up the good work and keep those funny yet truthful advise articles coming.

  28. L says

    I am 24 years old, make about $12,000 a year, and have $25,000 saved across stocks, bonds, and multiple interest bearing accounts

    What about those of us on low income/minimum wage?

    I am not looking to have a high standard of living, but Id hate to have to work till I drop dead.

    But just curious, i Haven’t seen many posts from low income folks

      • L says

        Thank you!

        In all honesty , $10,000 of that was matured stocks that had grown over time… I think my parents bought around $1,000 worth and by the time i got my hands on the stock at 18 it was worth $7,000…. So that grew a few thousand over the years to 10.

        The other 15 was just living on an extremely low budget… When I moved out I got into an apartment for 400 a month, absolute dump but I did save . I did without cable or wifi or air conditioning, didnt eat at restaurants and cut my own hair, just little things like that. I lived a block from goodwill so I did most of my shopping between there and aldis.

        Now I have a better place but I’m trying to resist the urge to fill it with nice purchases…

        2 other things I read online that helped lots : Squirrel money away into multiple accounts so it is harder to “find”. Dont use the ATM or the debit card

        And…. Put the credit card in the FREEZER. fill a bag with water and put it in and boom, your credit card habits are essentially frozen lol

        hope thatll help somebody out there. I have a long ways to go but have a start…


Leave a Reply

Your email address will not be published. Required fields are marked *