I’ve noticed that those who are good with money when they are young rarely have money problems when they’re older. Careful management of their assets will enable them to reach escape velocity so long as they get a good decade of growth somewhere along the way.
Those who piss money up the wall when they’re young often continue to do so throughout their lives, though some reform and sort themselves out.
Happily, the number of reformed prodigal sons is much greater than the number of prudent young people who become profligate oldies.
Having said this, how much money should you aim to have at different ages? What amount means that, all things being equal, you’ve pretty much made it?
The figures that follow are not strict requirements and they are well above the median. However, if you do manage to reach these figures, your odds of ever suffering severe money problems is very slight. This is partly because you clearly have the right attitude towards saving and partly because compounding interest will do a lot of the work for you from now on, given enough time.
All amounts are in today’s USD.
Age 30: $100,000
Few thirty-year-olds will make it to this milestone. Those that do (or get close) will have plenty to cope with emergencies. With modest monthly inputs from this point on, retirement will not be a problem.
Sans a drug addiction or horrific injury, you’re going to make it.
Those that steadily earn and saved this amount will be fine because they clearly know what they’re doing. The only thirty-year-olds with $100K who might be in serious danger of losing it are those that came into a chance windfall.
If that’s you, be careful. Learn about money or prepare to kiss it farewell.
Age 40: $500,000
If you were on $100K by 30, reaching $500K by 40 or so should not be too difficult so long as you keep doing what you’re doing.
At this level of wealth, you basically have enough to survive independently so long as you can live a frugal life, perhaps overseas.
Age 50: $1,000,000
Starting from those earlier amounts, getting to $1M should be a straightforward matter of not blowing it.
The proportional gap between ages 30-40 (x5) and 40-50 (x2) is because the younger fellow will need to keep working and saving to add to his investments, where as after the half-mil is reached, the momentum of compounding takes over and does most of the work for you. To put it another way, carefully investing 10-20k per annum is less important once your returns are about 30k anyway. That’s the meaning of ‘escape velocity’.
You’ll find that at this point ($1m) you’re as paranoid as ever about losing your money through tax, fraud, arbitrary government seizure or freezing of your assets, whatever. You’ll be thinking of ways to avoid it, keep some overseas, bank vaults full of gold, diamonds sewn into your clothes, your cardigan made bulletproof.
By all means, get advice and don’t put all your eggs in the one basket. There are some tips here. However, your chances of running out of money at this point are extremely low.
You’ve made it. In fact, you’d made it from age 30.
For everyone else
The figures here are aspirational, not a requirement. The closer you can get, the closer you are to financial freedom.
If you’re 30, debt-free and have $20K saved, that’s a good foundation. You can work with that.
If you’re 40 and have $100K, you’re a better chance of a comfortable retirement than a lot of your peers.
However, the older you are, the harder you’ll have to work to make up for lost time. To reach your goals faster, increase your income if you can, live a frugal life and save as much as possible.
At any age, the axiom holds: saving a little now is easier than saving more later. It’s better to invest in your 20s than in your 40s, but it’s also better to invest in your 40s than in your 60s.
How about you? What amount do you consider firmly adequate to have saved by any given age?
- This article provides general information. It does not take into account your personal circumstances and is not intended to influence readers’ financial decisions. Get your own, professional advice.