How Much Money Should You Be Saving Every Month at Age 30?

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Looking to retire comfortably? Read on to see how much money you should be socking away on a monthly basis if you’re still fairly early in your career. 

A general rule of thumb for retirement planning is to aim to replace 70% to 80% of your pre-retirement income during your senior years via a combination of sources. Those might include earnings from a part-time job, Social Security, and retirement savings.

Of course, the amount of money you’ll need to retire comfortably will ultimately boil to your specific lifestyle choices and goals. If your aim is to travel extensively, you might need more money than someone who wants to spend retirement pursuing low-cost hobbies and volunteering locally.

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Forbes Advisor says the typical 30-year-old today earns about $53,000 a year. But the reality is that if you’re 30 years old, your salary has the potential to climb a lot between now and when your career wraps up. And so it’s not so easy to determine how much annual retirement income you’ll need.

Sure, you could assume you’ll need 70% to 80% of whatever it is you’re making today. But what if the $53,000 salary you’re earning at present rises to $80,000 by your 50s? You might get used to living on that higher income. Or maybe not. It’s hard to say.

You may, therefore, want to aim for a retirement income that’s comparable to what the average senior has today. That’s about $75,000, according to recent Motley Fool research.

Meanwhile, the average Social Security benefit today is around $1,800 a month. That could change in time, but since it’s hard to run a future estimate, we’ll go with that for now. Multiplying $1,800 by 12 gives us an annual average Social Security income of $21,600. To have $75,000 a year in retirement income, you’d therefore need to be able to withdraw $53,400 a year from your savings.

Assuming you want to withdraw from your IRA or 401(k) at an average rate of 4% per year, which experts have long recommended, you’d need a nest egg worth about $1,335,000.

That number may seem daunting, but here’s how you can get there.

Consistent savings could help you meet your goals

The average 30-year-old has about $33,000 saved for retirement, says Empower. So if that’s what your savings balance looks like, you’re clearly a ways off from $1,335,000. But that doesn’t mean you can’t get there.

If you make an effort to sock money away in your IRA or 401(k) plan every single month between now and retirement, you might manage to amass quite a large amount of savings.

And believe it or not, it doesn’t have to be a lot of money, either. In fact, you might hit your savings goal with a monthly contribution of just $125 between now and retirement, assuming you’re investing your savings in a savvy manner. Here’s how.

That larger nest egg could be yours

The stock market has, over the past 50 years, delivered an average annual return of 10% before inflation, as measured by the S&P 500’s performance. So, let’s say you have $33,000 in retirement savings already, and you’re able to save another $125 a month through age 65. Let’s also assume you invest your savings in S&P 500 index funds or ETFs that deliver that same average yearly 10% return.

In 35 years, you could be sitting on about $1,335,000. It’s really that simple and feasible.

Of course, these calculations make a lot of assumptions. They revolve around a specific target retirement income and assume a certain level of savings already. If you’re 30 years old with no money saved for retirement to date, you’ll need to sock away about $420 a month to end up with around $1,335,000 by age 65. And if you want a larger nest egg than that, you’ll clearly have to save even more.

The point, however, is that if you save consistently and invest in stocks (particularly the broad market), you have the potential to retire with quite a lot of money. So even if you haven’t started focusing on long-term savings by age 30, it’s definitely not too late to amass a lot of wealth for a comfortable retirement.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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