How Much Income You Need To Save (By EVERY Age)

What's up, me guys? It's Graham here. So, it's recently said that nearly a third of Americans would go broke in less than a week if they lost their job. To make matters worse, 55% of Americans have less than $1,000 saved. 70% admit to bad spending habits, and just as many have nothing invested for retirement whatsoever.

Thankfully, though, it doesn't have to be that way. So, to solve this, here's exactly how much you need to save and invest by every age to eventually get out of debt, buy a car, own a house, become a millionaire, and one day retire. On top of that, we'll also cover how much money it takes to make it within the top 1% of every age group, the average income within those brackets, my own recommendations to put yourself ahead, and then finally, what you could do to get yourself back on track if you find yourself falling behind. So that eventually, you'll never have to work another day in your entire life ever again.

Although, before we go into that, if you guys appreciate videos like this, just do me a quick favor and invest in the like button by giving it a gentle tap and subscribing if you haven't done that already. And as a thank you for doing that, I'll do my best to respond to as many of your comments as possible.

All right, so to start, the first number that we got to talk about is net worth. This is calculated by adding up everything that you own of value, subtracting your debt, and whatever's left over is your net worth. So, with that out of the way, I want you to take a guess at what you think the average net worth is of a 23-year-old. Go ahead, just guess a number. You got it? A few minutes later? All right, well, according to the College Investor, that average net worth is negative $31,571. Meaning, if you're 23 years old and your net worth is anything above zero, then technically, you're doing a lot better than the average.

Of course, in fairness, this number is highly skewed by student loan debt, since a lot of young people are starting out with nothing, taking on enormous loans, and then barely making any money. So, don't worry, the numbers do get a lot better from here. Although, in terms of how much the average 23-year-old makes, here's where things get interesting: the median income for this category is $37,500 a year. And just guess at what you think it takes to make it within the top 1% of this category. Just guess. Well, that answer is $19,750 a year. Now, don't get the wrong idea—it's a lot of money, but it's a lot less than what it would take to make it within the top 1% of all earners in the United States, which comes in at $819,000 a year.

But lastly, as far as how much this age bracket has invested, unfortunately, it doesn't seem like there's a reliable indicator that breaks it down by age. Although, it does seem like that by the age of 29, the average 401k balance is $10,500, which means probably most people have less than this now. Since there's a very limited and skewed data set of people in their 20s, a lot of them are going to college, earning absolutely nothing, and accumulating debt.

Here are my own recommendations that would apply to anyone just starting out in their career, regardless of how much you make or save: Number one would be go and get a credit card. The point of this is to begin building up your credit score as soon as possible, since 50% of your score is made up from your on-time payment history and how long you've had your credit open for. This step is really just as simple as opening up a no-annul fee secured credit card, putting a few minor expenses on the card every single month, and then paying it off in full by the time it's due. That's it!

The second: go and make sure you open up a Roth IRA. Now, I understand that I mentioned this in practically every single one of my videos, but it's true. This is one of the best retirement accounts out there that you can invest up to $7,000 a year, completely tax-free. So, that by the time you're 59.5, you could be sitting on a lot of money.

But to help with that, third, I would recommend getting in the habit of saving 20% of your income. Now, usually, I set more strict measurements here, like save two to three times your monthly expenses—but honestly, I think setting up good financial habits as soon as possible, early on, is way more important. And if you could start saving 20% of your income now, it's going to be a lot easier to carry forward into the future, especially since the average Gen Z savings rate is currently sitting at just 3.4%.

And fourth, get yourself invested in the markets in some way or another. By doing this, you'll get the experience of investing; you could see what it's like, and then from there, it'll be a lot easier to automate in the future. In fact, it's said that investing could be so easy that everything you will ever need to know throughout your entire life could just simply be written on an index card. And if you're curious what that would be, here you go, just pause the video and you could read it.

And finally, there's one last point that I want to mention. This is the time that you should begin thinking about how much money you need in retirement. Now, I know for most 20-year-olds this is probably not what you want to be thinking about, but trust me on this. As you're about to see, it's a lot easier to start now than to push it off later.

Let me show you: if you want your money to grow enough to make you $50,000 a year by the age of 60 without you ever having to work another job in your entire life ever again, you're going to need $1,250,000 invested. If you begin doing that starting at the age of 20, you can do that entirely within a Roth IRA with as little as $416 a month. That means if you ignore the rest of the video but just focus on this one thing, you've retired yourself regardless of what you make or save beyond that.

That's why it's so important to set good financial habits early on as soon as possible because that leads us to then how much you need invested in your 30s. Let's start off with the average net worth. According to the College Investor, the average 30-year-old has a net worth of $42,139, and by the age of 35, that amount jumps all the way to $141,000. Now, in terms of how much the average 30-year-old is making, that amount was recently found to be $67,100 a year, and the median salary was $50,000 a year.

And if you want to make it within the top 1% of all 30-year-olds, that amount comes out to $323,000 a year. Then, just for fun, if you want to make it within the top 0.1% of all 30-year-olds, that amount would be $570,000. As far as how much they have invested, according to Investopedia, those between the ages of 30 to 39 have roughly $38,000 within their 401k. A separate study found that for people in their 30s, the median net worth was a more reasonable $34,000, since averages could often be skewed by tech billionaires and trust fund kids who inherited a lot of money early on.

So, even though these numbers seem somewhat all across the board, the general rule of thumb is pretty much this: by the age of 30, you should aim to have at least one time your annual salary saved up and invested. So, if you have a salary of $60,000, then that's the amount that you should aim to save. This all might seem overly simplistic since this is probably during a time where you're just starting out your career, you're increasing your income, you're paying off student loan debt, maybe you're just buying a house. That's why overall I think if you follow these financial milestones throughout your 30s, you should be okay.

First, you should aim to have a credit score of at least 750. This is going to put yourself in the best position possible to be able to get a low-interest-rate mortgage or be the ideal borrower for pretty much anything that you need. Second, you should try your best to be completely bad debt-free by the time you're 30. This means that you don't have any loans or debt above a 6% interest rate, you don't carry any credit card balances, and besides the probability of a mortgage, you don't have anything else weighing you down.

Third, you should keep a 3 to 6-month emergency fund at all times. Doing this is as simple as calculating exactly how much money you need to survive every single month, including housing, car payments, insurance, food, and utilities, and then saving up 3 to 6 times that amount. Now, fourth, since this video is literally titled "How Much Money You Should Have Invested by Every Age," as your income increases, try to save 25% of your salary. Like I mentioned earlier, a lot of these habits really begin in your 20s, and if you could stick with it, it's going to be really easy to continue into your 30s.

For instance, if you're able to save 20% of your income throughout your 20s and then you get a raise by the time you're 30, it's really easy to be able to save the difference and now save 25% without really even noticing it. Since we're going with the goal of being able to earn $50,000 a year from your investments, if you're just now starting out at the age of 30, it's still absolutely doable to have $1,250,000 invested by the age of 60, but it will require that you invest $895 a month to be able to catch up.

Again, if you're earning the median income of $50,000 a year, this will equate to a 25% savings rate, so it's possible but it's going to take a bit more work. And now let's talk about people in their 40s, because this is where things really begin taking off. That's because in what's called their peak earning years, all the hard work put in throughout the last 20 years is beginning to pay off.

In terms of the typical 40-year-old, net worth that's now grown to a median of $80,000 according to the Financial Samurai blog. But since some people in their 40s make so much money, that skews the average to some pretty high numbers. That's why the College Investor found that the average net worth could be as high as $319,000. But in terms of how much the average 40-year-old makes, that comes out to $78,334. And if you want to reach the top 1% of all 40-year-olds, you'll have to make an income of $650,000 a year.

Well, the top 1% net worth for 40-year-olds is $6.5 million. Of course, if you want to take that a step further and make it to the 0.1% of people in this category, you'll need to make about $1.1 million a year. And if you want to take it even crazier than that and go to the top 0.1% of all income earners, that begins at $7.5 million a year. Anyway, coming back down to earth, throughout your 40s, the average person has a net worth of $713,000, the median net worth is $126,000, and Investopedia tracks the average 401k balance at $93,000. So, most likely, the true number is somewhere around there.

Now, generally, alongside with that, most articles and experts say that by the age of 40, you should have three times your annual income saved up and invested. In order to do this, assuming you need three times the average $70,000 a year salary, that'll require you to save between 15 to 25% of your income beginning at the age of 25 at a 7.5% return, which would give you about $220,000 left over.

Beyond that, though, here's a few other recommendations that I'd like to throw into the mix so that anyone would be able to work towards them. Number one would be to focus on maxing out retirement accounts. This would include a Roth IRA at the $7,000 a year, a 401k up to $23,000 a year, or an HSA up to $4,150 a year.

Second, you should also aim to maximize your earnings over the next 10 years. The reality is as you approach some of the highest earning years of your life, it's important that you make the most of it. After all, it was found that employees who stay within the same company for more than a few years get paid on average 50% less than someone who changes jobs more frequently, and that should be taken into consideration.

Third, have a budget to stick to no matter what. Now, even though technically, this is something that you should be doing at any age, it's especially important here because even though you're earning the most, you're also probably spending the most. That's why I think it's really important right now to live below your means, think long-term, and make sure whatever you're doing is sustainable.

Then fourth, by now, you should know exactly how much money you need to invest to be able to retire by whatever your goal is. For example, if you're starting out with $0 at 40 years old and you want to retire at 65 with $1.5 million, you're going to have to invest $1,750 a month to catch up. So, the sooner you start thinking about this, the easier it's going to be, and the better that you could plan ahead.

But now we should start talking about how things begin stacking up at the age of 50. The median net worth for someone in this age is about $29,000. Well, the average net worth is much higher: $1.3 million, again boosted up by some of those billionaires who skew the numbers heavily towards the upside. But hey, if you want to be within the top 1% of net worth for those who are 50 years old, that'll be about $9.7 million.

And what I personally found the most interesting from this is that the income throughout your 50s doesn't really differ that much from your 40s. In fact, the median salary here is the same: $60,000 a year, while the top 1% earn around $650,000 a year. At this point, most standard guides say that you should have five times your annual salary saved up at 50. So, if you're making $70,000 a year, that would be $350,000 saved and invested.

But if your goal is to have $1.5 million saved up by the age of 60 to be able to retire, if you follow this advice, you'd actually be falling behind. Just consider this: if you started investing $416 a month by the age of 20, by the age of 50, that would have grown to almost $600,000, which is much higher than the amounts that are recommended here. This is exactly why my financial milestones would be a bit different from this.

First, aim to have at least 7 to 8 times your annual salary saved up or 10 to 12 times your annual expenses invested, depending on how close you are to your goal. If you find yourself falling behind on this further than expected, then your options are really just one of three: make more money, retire later, or win the lottery.

The second, depending on where you are in this situation, you should be about halfway through paying off the mortgage on a primary residence. Some people could have mixed feelings on this, depending on the interest rate of the mortgage. But my personal philosophy is this: I love low-interest-rate fixed debt, but there's also something to be said about the security and peace of mind of having a paid-off home.

That's why I believe you shouldn't pay it off sooner than needed, but once it's paid off, you should probably keep it paid off. And then third, by this point you should have a very clear understanding of exactly when you'll be able to retire and how much more money you need to be able to get there.

And then finally, here's where you're going to be around age 60. For those curious, the median income is about the same at $58,000 a year, with the top 1% making about $650,000 a year. But I will say this is super confusing because other studies that I've seen say the top 1% in this category actually makes more like $1.5 million a year, so I can't tell exactly which one is correct.

Although, as far as net worth is concerned, the median falls around $490,000, with the average being significantly higher at $1.6 million. And if you're curious what it takes to be within the top 1% of this category, that is $14,338,000. Now, again, most standard guides say that you should have about seven times your annual income saved up by this point, but I slightly disagree.

And here's what I think: ideally, by 60 years old, you're going to want to have anywhere between 10 to 12 times your annual income saved up. If you start thinking about this by the time you're 30, this could easily be achieved by investing 10% of your salary beginning at the age of 30—a 7% return. And if you bump that up to a 20% savings rate, you could easily save 20 times your annual income within 30 years.

The second, I also think it's a really good idea to have a paid-off primary residence at this time or at least get really close to it. This one's going to give you a lot more stability throughout retirement, and by having a fixed cost of ownership, you're not going to have to worry about your rent or other costs going up substantially. Not to mention, you can have a paid-off asset that you could sell in the event you want to downsize or move somewhere else.

The third, this is usually around the time where they say your income is generally peaked or even begun to decline. So, if you're in the highest earning years of your life, you should probably save the most of it and play it smart. Now, obviously, all of this is really just meant to be a rough ballpark, and some people could be way further ahead or way further behind.

Although I don't think that's important, instead the point of this video is to make you realize that now is the best time to start, and the sooner that you begin on these financial habits, the easier it's going to be, even if you're not where you want to be. All of it really just starts small—with budgeting, saving a little extra money, investing consistently, putting that on autopilot, maximizing your options, maximizing your income, and then no matter what, hitting the like button and subscribing if you haven't done that already.

So, with that said, you guys, thank you so much for watching, and also feel free to add me on my newsletter down below in the description. I go over topics like this every single week in deep dive, so if you want to be a part of it, again, the link is down below. It's totally free. Thank you so much, and till next time!