# How Much Money You Need To Save By The Time You’re 35

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Over on Twitter, some people are roasting MarketWatch for an article originally published in January that says you should have double your salary saved by the time you’re 35.

I understand why people are poking fun at it. As MarketWatch notes in its rudely-titled follow-up, “the response highlighted just how anxious people feel about their financial responsibilities and the obstacles that outweigh saving for retirement.”

Putting such a large number on something is sure to scare people, particularly when you consider only 53 per cent of Australian couples and 22 per cent of single people are on track to reach a comfortable retirement income, according to a 2014 Australian study.

In fact, even diligent savers would be hard-pressed to meet that threshold. Here’s an example provided by Danielle Schultz, an Illinois-based Certified Financial Planner:

Let’s consider Mary: who begins working at 25 years old, earns \$US60,000 (\$79,568)/year to start [and] gets a 2% raise every year. [She] contributes 10 per cent of her salary (\$US600 (\$796)/year or \$US500 (\$663)/month to start), and this increases by two per cent every year as she gets a raise. [Her] employer matches three per cent of her salary, so a total the first year is \$US7800 (\$10,344) going into her retirement plan.

Let’s also say she’s invested pretty aggressively – OK, for a young person – and she earns seven per cent per year on the money.

In 10 years, at age 35, Mary would have \$US116,712 (\$154,775) saved and invested. Her salary would have risen to \$US73,189 (\$97,058), so yes, it’s within the realm of possibility. In order for Mary to have double her salary saved (\$US146,378 (\$194,116)), she’d need to be saving a total of \$US9800 (\$12,996)/year, increased each year by two per cent.

It’s also the minimum rate I’d recommend she save for retirement. In 35 years she would have around \$US1 (\$1) million — not really a fortune, but more than a lot of people have. That plus Social Security might get her through, although hopefully Mary will improve her earnings beyond two per cent per year and be able to save much more. 35 years gets pretty fuzzy for the projections business, but I think you can see why saving early at at least 10 per cent is pretty important.ï»¿

That said, the article is fairly inoffensive — I’ve even written something similar to it! Because despite the possibility that the figure will be off-putting to some people, it’s also … true. Yes, saving double your salary by the time you’re 35 will help you achieve a stress-free retirement.

Of course, it’s not possible for many people. That “stress-free” retirement is more a figment of the past (it wasn’t really true for that many people in older generations, either) than a guarantee for workers now. As I wrote previously, these numbers are just a way for you to have a frame of reference for how much money you’d like to have so you can work toward it.

Like everything, there’s no one-size-fits-all rule that will apply to everyone when it comes to your personal finances. It’s true that money experts — the people at places like Vanguard and Fidelity — use double your salary as a benchmark, but that’s all it is. It’s the best-case scenario. Personal finance experts also say you shouldn’t take on debt you can’t afford and to never buy coffee on the way to work, but obviously people don’t follow those “rules,” either.

Just like you probably don’t eat your five servings of fruits and vegetables per day or abstain from drinking and tobacco to maximise your health.

“I think this rule of thumb wouldn’t apply to everyone. There are so many variables to consider, it is impossible to give broad, blanket advice,” says Kathleen Grace, a Florida-based Certified Financial Planner and managing director at United Capital. “For example, what kind of health care coverage will they need in the future? Will they work part time during retirement? What is the cost of living where they will retire? Will they have debt in retirement? Are they planning on selling their house to fund retirement?”

## How to Save Double Your Salary

“Being able to save means you have to control your costs so that they total less than what you earn,” says Schultz. “So, if you can’t save, you either need to slash expenses, earn more, or some combination of the two.” There’s no getting around those simple facts.

You’ve heard all of this before, right? And you’re saying: I have to save for retirement, pay off student loan debt, save for my wedding and a house and pay for my kids. All on stagnated wages or gig economy work. It’s just not enough.

But that doesn’t mean you should just give up. First, make a plan. Start small and keep building — \$10 per month, then \$25, whatever you can manage. Don’t get discouraged because you don’t compare to arbitrary measures. Don’t vote for people who want to strip workers of the few rights they have, make saving for retirement harder and take away health care from the most vulnerable, all to the benefit of multi-millionaires and international conglomerates.

Focus on what you can control, and make minor lifestyle changes that can boost your bottom line. “The best investment someone in their 20s and 30s can make is in themselves,” says Whitney. “In their skills, experiences and professional networks. All of these wouldn’t show up on a balance sheet but could help slingshot someone towards something better.”

To go back to the health analogy, you can’t control everything — some conditions are hereditary, others are caused by accidents or other outside forces. But still, we eat as healthily as we can and exercise even though we hate it to mitigate problems as best we can. Most people don’t just throw their hands up in the air and give up because they’re going to get sick someday. The same needs to happen with your finances. You can’t control everything, but you can make conscious decisions to save some money that can help you down the road.

This story has been updated since its original publication.

• morto says:

This is a repost from the US where they don’t have super.

• dctrjack says:

The advice is still relevant to our audience. Make a plan, keep building etc? Great advice. I had to get rid of things like the US 401(k) retirement savings plan, because yes, we have super — but saving is still important.

• wazman21 says:

Yep. It needed a MUCH more thorough re-write for Australia. Or at least a line at the top stating “this is a half-cooked US article repost” to set expectations.

• obtainable says:

Even if the article is completely tone-deaf and out of touch, there’s still some good advice there.

I’d argue that as a rule, you should save at least 10% of your income. Even if you’re totally broke, Centrelink-broke. Not so that you can buy a house, but so that you can fix your crappy car, deal with emergencies, etc.

The poorer I’ve been, the more I needed savings. (Most of my life having twice my *weekly* income was a huge buffer).

• dctrjack says:

We brought this across from the US – I filtered out quite a bit of their US specific content, but I think there is good, pertinent advice in here. Yours is also great.

• maagha says:

Saving is important, but also saving through super has clear tax benefits that this article has ignored though. With savings into super being taxed at 15%, as oppose to whatever marginal bracket you are on. Saving 17% on average. *All subject to cap

• grunt says:

Super Guarantee changes things here in Australia. You personally wont necessarily be putting aside most of that money that gets you to 2x your income. Since it went widespread in 1996 (?) its been something that’s been quietly doing that, so many people will be closer than they realise.

For me, I push for people to put aside 5% from the first paycheck, and just forget about it. As they get payrises, the amount will go up, and keep the lot ticking over. That’s enough to top off the 9.5% to be something worthwhile at 55 or so. More is better, and theres absolutely nothing wrong with 10% by any means. Its just a harder sell to a 21 year old.

But as @dctrjack said above, its about having a plan. Set it up early to get rewarded later. And the article has solid advice in that regard, even if the numbers don’t apply specifically to Australia.

Also remember that super guarantee is for YOUR benefit. Employers that try to avoid it (paying cash in hand, requiring an ABN, etc) are just doing it to put your money into their pocket. And you end up losing out because of it.

• whitepointer says:

I’m almost 38, and while I don’t have double my wage saved away, even if you combine my super with my personal savings, I think I’m still in a good spot, because I own a house (well, I have a mortgage that’s roughly 1/4 paid off) and 2 cars that are not financed. So while I might not have that target figure saved away in actual cash, I have a lot more than that when you consider the equity I have. When we are ready for retirement in 30-35 odd years and our 2 kids have grown up and moved out, we will probably at some point sell the house (which will be totally paid off by then) and move into something smaller, giving us more money in the bank.

• kelvinate says:

I am with you. i dont get why I am saving all the money in another place where I can put every extra income into my mortgage.