How much money should I have by this age?

How much do I need for a comfortable retirement?

These are questions I get asked all the time.

And so in this video, I wanted to cover the answer to each.

I'm all new now, some of these numbers might surprise you.

They certainly surprised me when I first saw them.

But there is a little trick to fast track your progress, which I'll share later on in the video.

Let's start with the decade of your 20s.

You might be fresh out of university with a mountain of student debt.

Maybe you've done an apprenticeship or a training program instead, and you likely have an entry-level paycheck.

The average 20-year-old in the UK has less than £1,000 saved.

And in the US, that number is less than $1,800.

At this stage, it's not exactly about the dollar amount that you've got saved up, but actually about building the right financial habits that will pay off big time for the decades to come.

So with that said, some of the key things to focus on in your 20s are, number one, get rid of any high interest rate debt.

Consumer debt, like credit cards, can very quickly spiral out of control, growing faster than your money would make in investments.

So if you have high interest rate debt, the best way to keep more of what you make in your pocket is to pay that off.

Make that a priority.

Number two, track your spending.

Knowing where your money is going is the very first step to being able to save more of it.

So the simple act of doing this is going to put you further than most people in this age group.

And number three, work towards saving up at least one month of your living expenses, and then once you've got that covered, then do number four.

And that is opening up a tax advantage investment account and invest even the smallest amount, $10 or equivalent.

Even if you don't have that much in your 20s, it doesn't matter.

The reason you just want to get started is firstly, to start building financial habits into your identity from early on.

And secondly, because you have time on your side, so even the smallest amount can start compounding.

You can get started by using the Trading212 link in my description and get a free share worth up to £100 just by depositing £1.

Moving into the 30s, hopefully by the age of 30, you have a bit more to your name than you did in your 20s.

The guideline, according to Fidelity, is to have one year of your salary saved up.

So if your salary is £50,000 by age 30, you'd have £50,000 saved up.

So that amount includes the money sitting in your savings account, your retirement account, and or your investment account.

Now, I don't want you to look at this guideline and feel bad or feel behind because that's not the point and I myself hadn't reached this guideline.

But what I do want to show you is where these guidelines are coming from, why they exist, and how they will translate into your retirement savings.

So according to the Bureau of Labour Statistics, the average annual salary for people in their 30s in the United States is around $50,000.

And in the UK, it's just under £40,000.

So if someone in their 30s who is making £50,000 per year were to invest that £50,000 and then contribute an additional £500 per month from that point on, assuming an 8% average rate of return, they would have approximately £1.77 million saved up by the time that they reach 65.

That's pretty decent.

That's what the compounding growth for a 35-year period from age 30 to 65 looks like.

The three goals in this decade is number one, save a bigger percentage of your income.

Aim to save and invest at least 10% to 20% of your income every year.

Even more, if you can, your 20s is more about finding out what you want to do, exploring as many things as you can, focusing on building your career capital, so the skills and the credentials, and what you need to then in your 30s find out what has worked for you and then double down on that to make more money.

Number two, avoid lifestyle inflation.

An easy trap in your 30s is to increase your spending in line with your income.

Maybe this wasn't a thing in your early 20s because you didn't have much money to start with to spend.

But in your 30s, you've really got to watch out for it.

Number three, work towards becoming debt-free except for your mortgage.

This will free up more of your income to dedicate to investments and to retirement savings.

By the way, if you do want to learn how to invest, then I have a completely free masterclass where I go into more detail about how to multiply your money by knowing the right things to invest in, the biggest mistake beginners make and how to avoid them, and how to set yourself up financially for a worry-free future.

It's completely free and the link is in the description.

And then we move into the next decade, 40s.

So we've seen that the guideline is to have saved one year of your salary by age 30.

Then the aim is to save one more from 30 to 35 and then another from 35 to 40.

So when I read that guideline, my first instinct was, okay, that's a lot of money.

How many people will actually be able to do that?

But actually, the key point here is that the savings target is not just about the amount.

It accounts for the compounding growth of the money that you've already saved as well.

So let's break that down.

The goal is to save three years of your salary by 40.

Let's say your salary is $50,000.

The total target would be then three times $50,000, $150,000.

However, you've already saved one year of salary by age 30.

So this $50,000 will grow or will have grown to around $107,000.

So now the remaining amount you need to save from 30 to 40 is $150,000 minus $107,000, so $43,000.

Dividing that $43,000 over the 10 years from 30 to 40, that comes out to only needing to save about $360 per month, not the full $830 per month that you might have initially calculated.

So the key point is that the compounding growth of your initial savings make a big difference in how much additional savings you need to hit the overall target.

So the earlier you invest, the easier it is to then meet the rest of the guidelines.

The three areas to focus in your 40s are, number one, start maxing out your retirement contributions.

Aim to invest at least 15% of your gross income for your retirement.

These are probably your best earning years in most cases.

So save as much as you can both in your employer-sponsored retirement account as well as your own investment account.

Number two, be proactive in your tax planning.

Meet with a tax advisor who will help you maximize your deductions every year.

And number three, understand how you're going to prioritize your expenses.

If you find yourself taking care of your parents, consider their needs in the context of all of your other and your own financial priorities as well.

Home health care, assisted living is expensive and those costs need to be weighed against saving for your own retirement and for your children's savings and education as well.

So now is the time to factor in everything and how you'll make it work.

Then as you approach your 50s, the savings goal becomes a bit more ambitious.

Experts generally recommend having six times your annual salary saved up by this age.

For example, if your salary has been around 60,000 per year, the target would be to have 360,000 saved and invested by 50.

I don't know how realistic this is.

And looking at the history of the stock market and the average rate of return, it seems doable.

But if you're in your 50s and you're watching this, I'd love to hear from you.

And I'm sure so would everyone else.

Let us know in the comments how realistic this is and what you would have done differently if you could go back in time and tell your 20 or 30 or 40-year-old self.

Things you want to look at in this decade of your life include, number one, reassess your investment portfolio.

As you start approaching retirement, you want to begin thinking about wealth preservation, not just wealth accumulation.

So it's recommended to make your investment portfolio less risky.

Consider investing in more stable investments like bonds to balance out some of the risks that you may have taken for your portfolio in the early decades.

Number two, think about how you can turn your investments into a steady stream of income in retirement.

This would be a good time to talk to an advisor who specializes in helping people turn their retirement assets into income.

They'll look at important financial factors such as whether you might outlive your retirement savings.

They'll consider inflation, best and worst case scenarios, health expenses that you need to take into consideration, and a lot more.

Then we move into age 60 and beyond.

By age 60, retirement hopefully is on the horizon.

You want to make sure you have now enough saved up to maintain your lifestyle.

Ideally, the guideline is to have saved up at least eight times your annual salary.

Some things to consider at this age.

Number one, review your investments.

Look at your risk tolerance to maintain the savings you've built and not suffer a big loss right at the beginning of your retirement.

Find out more on optimal ways to invest your retirement savings to make sure you don't outlive it.

Number two, ensure you have a clear retirement plan.

This includes understanding your expected income sources such as pensions, savings and investments and adjust your plans as necessary to meet your goals.

So you also want to be thinking about health expenses, how you're going to pass on any savings, investments, assets to your children and taking into account those plans as well.

So those are some very high-level guidelines for you to consider.

Before I close off, I do want to leave you with a final thought.

These numbers are all well and good.

These guidelines are all well and good, but they tend to box everyone in into the same lifestyle which is really far from the reality and the situations or circumstances each of us have.

An article by GoBankingRate actually found that most Americans have less than $1,000 in savings and almost 50% of those living in the UK have less than £1,000.

This massively contrasts with the guidelines and the numbers that I've said earlier in the video.

So even if you have more than that saved up at this point, that is you doing better than most people.

At the end of the day, these guidelines and these videos are great to get knowledge and education from and then you want to tweak it and apply it to your situation.

Thank you for watching.

If you like this video, you may also enjoy this video right here which explains in more detail how compounding works and how the first £100,000 is the most important when it comes to your savings.

Thank you so much for watching and see you there.