Personal finance gurus and successful investors may all have their own opinions on how to successfully save for retirement, but one thing is clear: You need an emergency fund. A new guide from CNBC Select has revealed how much you should save for retirement and an emergency fund based on your age group.
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Planning for retirement is a topic on the minds of many adults in the U.S., and with the rising cost of living and high inflation, it’s never been a more stressful time to plan for retirement. Luckily, the financial experts at CNBC Select have put together a handy guide to some age-related savings milestones. According to data from retirement plan provider Fidelity Investments, you need to save 10 times your income to retire comfortably at age 67. The earlier you want to retire, the more money you’ll need to save.
According to Fidelity, by age 30, you should have the equivalent of your annual salary saved. By age 40, that number jumps to three times your income; by age 60, you should have at least eight times your income saved. This savings includes income from your 401(k) and any investments.
But that’s precisely the difficult part: saving for your retirement.
The Schroders 2024 US Retirement Survey found that nearly 50% of Gen Xers haven’t done any planning for their retirement, including saving. The survey also found that 46% of respondents expect to have less than $500,000 in savings by the time they retire, and most respondents believe they will need at least $1.2 million saved to retire comfortably. This signals a looming crisis in retirement savings, in part because pension plans are dying. For example, CNN Business reported that by 2022, only 15% of private-sector workers had a pension plan. The outlet also reported that only 44% of US adults could afford to put aside $1,000 per month for an emergency fund, with others dipping into their retirement funds early.
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With such dismal statistics, how do you even begin saving for retirement, let alone an emergency fund? Even small monthly contributions can grow significantly if you start early enough. For example, CNBC Select found that putting $20 a week into a high-yield savings account can save you at least $1,000 a year. That means making simple lifestyle changes like eating at home, making lunches, or limiting the amount of coffee you buy each week. Taking advantage of compound interest is one of the best ways to build wealth. Former Wall Street titan Sallie Krawcheck advises people to automate their savings and use high-yield accounts with no monthly fees, deposit or balance requirements. CNBC Select recommends using a LendingClub High-Yield Savings account, which offers a 4.50% APY.
Don’t forget to have short-term savings goals, like an emergency fund. Personal finance guru Dave Ramsey advises that the first step in building an emergency fund is to save at least $1,000. Ramsey admits that this isn’t enough, but should instead be used to cover small expenses, and that an emergency fund should have between three and six months’ worth of expenses saved up. This amount will vary depending on the type of job you have. Like freelancers, people with less stable work should ideally have at least a year’s worth of expenses saved up.
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This article Is Your Emergency Fund Ahead? The Savings Needed to Be in the Top 5% of Your Age Group originally appeared on Benzinga.com
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