Are You Saving Enough? A Look at Average Balances Across Ages

Savings Decade by Decade

Each decade of life brings with it both new financial demands and new savings opportunities. Here is a brief rundown of some of the major ones.

Savings in Your 20s

Unless you’re unusually frugal (or really lucky), your savings in your early 20s may not add up to much. For one thing, you’re most likely just getting started in your career and earning an entry-level salary or not much more than that. For another, you may need whatever spare cash you have to pay off student debt. 

But no matter how meager your resources, your 20s are an excellent time to start saving. Two worthy goals to aim for would be building an emergency fund, just in case, and putting as much as you can into a 401(k) or similar retirement plan if your employer offers one—and especially if your employer will match some or all of the amount you contribute. 

In particular, consider a Roth account if your employer offers that option. Roth accounts don’t provide any tax deduction for your contributions, as traditional accounts do, but you’re probably in a low tax bracket now anyway, and that might not make much difference. When you’re ready to retire someday, you’ll be eligible to withdraw your money and any earnings on it tax-free, so think of it as a gift to your future self. What’s more, the money isn’t totally locked up if you need it before then; you can withdraw your contributions (but not their earnings) tax- and penalty-free at any time.

Savings in Your 30s

By some point in your 30s, you may be earning more money, giving you some disposable income to earmark toward savings. This is also the time of life that many people consider starting a family and/or buying their own home—both of which, although rewarding in other respects, can cost a lot of money.

While you face competing demands for your spare cash, consider upping your retirement contributions if you’re in a position to do so.

Also, if you do buy a home, take some comfort in the fact that homes generally appreciate in value over time, which is also contributing to your savings by building equity.  

Savings in Your 40s

Your 40s may mark the beginning of your peak earning years. Data from the Bureau of Labor Statistics shows that the 45-to-54 age group has higher income, on average, than any other cohort.

So these could be your peak savings years, as well. If you have college-bound children, you might want to direct some of your savings to a 529 college savings plan if you haven’t already done so. These plans allow you to set aside money and later withdraw it tax-free if you use it for qualified education expenses. Some states also offer a tax break on your contributions.  

Don’t let up on your retirement savings, either. You may still be 20, 30, or more years from retirement, which means the money will still have a long time to grow before you start to need it.

Savings in Your 50s

In your 50s, retirement may seem less like a far-off fantasy and more like something that might actually happen to you someday.

If you are in a position to increase your retirement plan contributions, note that at age 50 you become eligible to make extra catch-up contributions. In the case of 401(k) plans, for example, anyone 50 or over who earns enough can contribute up to $31,000 for 2025 ($30,500 for 2024), which is $7,500 more than the $23,500 maximum for younger workers for 2025 ($23,000 for 2024).

While you should still be saving for retirement if you can, 59½ is the age at which you can start withdrawing money from your retirement savings penalty-free if you need to.

On average, people’s peak earning years continue into their 50s. As mentioned, the 45-to-54-year-old cohort earns the most on average. Incomes then fall off somewhat for the 55-to-64 group. However, the latter group’s numbers may be dragged down a bit by workers who retire early or who lose their jobs and find it difficult to obtain a new one at their former salary.  Workers whose careers keep chugging along may continue earning raises and promotions after 55, enabling them to boost their savings.

Savings in Your 60s

By your 60s, you may have a substantial amount of money saved for retirement. (If not, you could have some catching up to do, so see the discussion of catch-up contributions above.)

Even if you plan on retiring soon, it’s worth remembering that retirement can last a long time. If you retire at 65, say, and live to 95, some of your retirement savings will still have another 30 years to grow.

With any luck, college tuition bills may be behind you, and your home, if you own one, could be largely paid off.  Assuming you still have income, this could be another opportunity to increase your savings rate.

Savings by Retirement Age and Beyond

Many people continue to save well into their retirement years. Today there are no age limits for contributing to retirement plans. (Traditional IRA contributions once stopped at age 70½, but that changed in 2020.) You do need earned income for that purpose, although the income doesn’t have to come from a full-time job.

You can also save money outside of your retirement plans, of course. In fact, in your 70s you will have no choice but to begin withdrawals from your retirement plans (except for Roth accounts), whether you need the money or not. That’s because you’ll be subject to required minimum distributions (RMDs) from any non-Roth retirement accounts starting at age 73. You’ll also have to pay income tax on that money.

How Much Should You Have in Savings?

Ideally, your savings should grow over time. One way to think about how much you should aim to have tucked away at any given age is to look at it as a multiplier of your income. Here, for example, is a fairly common formula:

• Savings by age 30: the equivalent of your annual salary
• Savings by age 40: three times your income
• Savings by age 50: six times your income
• Savings by age 60: eight times your income
• Savings by age 67: 10 times your income

This is merely a guideline, of course, but if you have substantially less than that, it might be a sign that you should try to save more aggressively.

Strategies for Increasing Savings

If you need to increase the amount you’re saving, there are a number of ways to go about it, not all of them painful.

1. Watch Your Spending. Any money you can switch from spending to saving is yours to keep. While many of us cringe at the very word “budget,” creating one can be a good way to figure out where your money is going and to separate your essential expenses from the merely optional (and expendable) ones.

2. Pay Down Debt. Some debt, such as a home mortgage or federal student loan, is justifiable and often impossible to avoid as you move through life. Other debt, such as high-interest credit card debt, can be a needless drain on your financial resources. So if you have any, try to pay it off as soon as possible and then put that extra money toward your savings.

3. Make It Automatic. By arranging for a regular amount to be withdrawn from your paycheck or checking account and deposited in a separate savings or investment account, you can save without even thinking about it. This has the added advantage of making the money disappear from view before you have a chance to spend it.

4. Invest Smartly. Increasing your savings isn’t only about the amount of money you set aside. It’s also about what that money goes on to earn you. So, for example, rather than settling for a low-interest bank account that might not even keep up with inflation, look into high-yield accounts, money-market funds, and other appropriate options. There’s more about this in the next section.

Where to Keep Your Savings

As noted earlier, you have a nearly limitless array of choices when saving and investing your money.

Your first goal should probably be an emergency fund if you’re just starting. In general, the best place for that money will be an account that is both very liquid and unlikely to decline in value. High-yield savings accounts and money-market funds can meet those criteria.

Once you’ve established an adequate emergency fund, you can begin to be a little more adventurous with your savings. For example, you may want to look at stock or bond mutual funds or ETFs. They have the potential to earn more than savings or money-market accounts, but they also face the risk of losing money. To avoid taking too much risk with your savings, it’s best to gradually build a diversified portfolio consisting of a number of different asset types.

Keep that concept in mind as you allocate your retirement plan contributions. Most employers offer a menu of different types of investments with varying levels of risk. If there’s one on the list, you might also consider a target-date fund; these funds gradually adjust their risk level over time, becoming more conservative as you get closer to retirement.  

The Bottom Line

Having enough money socked away can be a lifesaver in some situations and a great comfort the rest of the time. Ideally, your savings should increase in size as you go through life, eventually providing you with enough money to enjoy retirement with any financial worries behind you.