How much you should have in savings is a common question asked among many Singaporeans.
“How much should I have by 30, 40, 50, or 60 years old?”
What Constitutes for “Savings”?
The “saving” guidelines that we are using in this blog post include your entire net worth.
This includes your investments in stocks or through Robo-advisors, CPF, and even your HDB value.
If you’re interested to read more about how to calculate your net worth, you can check out this link here.
How much you should save at 30, 40, 50 or 60
To come up with savings each of us should have by 30, 40, 50, or 60 years old, let’s work backward…
One should have at least 25 times your annual expenses at retirement. You can adjust this amount accordingly, depending on the age you want to retire. Those who want to retire earlier at 45, 50, or 55 will have to compensate for additional years without income.
For this example, let us use the statutory retirement age of 65, the minimum age to start claiming CPF Life payouts. This means that we should have 25 times our annual expenses at 65 years old.
- By age 30: 3 times your annual expenses.If you spend $20,000 per year, you should have $60,000 by your 30th birthday.
- By age 40: 8 times your annual expenses.
- By age 50: 15 times your annual expenses.
- By age 60: 20 times your annual expenses.
- By age 65: 25 times your annual expenses.
Recommended Savings by age 30, 40, 50 and 60
First of all, everyone should aim to save at least an emergency fund. An emergency fund is important at any age. This should be 3-6 months of your annual expenses in highly liquid cash equivalents.
Once we have our emergency fund set aside, we can focus on saving and investing.
An average Singaporean worker has 37% (20% from self, 17% from employer) contribution of wages to CPF. With the average earnings of $4563 per month, $20,260 will be saved in CPF alone.
Of course, most of us will also continue saving outside our CPF-mandated savings. I personally use the 30-20-20 rule to save an additional 50% of the after-CPF salary. Using the average wage of $4563, this is $1,825 per month and $21,902 per year!
Here’s my savings guide by age, depending on how many years we have worked.
- By age 30: $150,000 – $300,000
- By age 40: $250,000 – $1,000,000
- By age 50: $400,000 – $2,000,000
- By age 60: $1,000,000 – $4,000,000
- By age 65: $1,200,000 – $5,000,000
What if I don’t have the savings of my age group?
Personal finance is after all, personal. The practical reality and ideals may not always match.
Everyone has different financial situations. Such as some people may have started a family; some may have family members with expensive medical conditions; some may be drawing a lower income.
Focus on your annual expenses and not the absolute dollar amount.
Everyone has a different ideal post-retirement lifestyle. And each of us needs a different amount of money to retire.
These milestones are simply to help you stay on track or kick it into gear if you’re not close.
If you’re young, you have time on your side. It is possible when you start early and have remaining years to catch up.
How to Start Saving at all Ages
The above guidelines are absolutely achievable if you employ the 30-20-20 rule. In Singapore, a common goal for many of us is to reach $100,000 of savings by age 30 (excluding CPF).
The only way to reach financial independence is to spend within your means. Even with a six-figure salary, a low saving rate will not bring you near financial independence.
Accumulation Phase – 20s and 30s
In your 20s, you have just started working. This is the time to build up your emergency funds of 3-6 months. This may be your last few years of YOLO, before stashing the surplus in investments.
In your 30s, you’re still working and hopefully settled in a job you like. You may have also more financial obligations at this age. Such as getting married, starting a family, or buying a house. You should have at least 1-3 times your annual expenses.
Midlife Crisis – 40s and 50s
In your 40s, you may be tired of the rat race but stuck with a golden handcuff. Upgrading to a condo, buying more new cars. You may also be sandwiched between your elderly parents and children. Hopefully, your capital of 6-10 times annual expenses is generating some interest or dividend returns to cover some cost.
In your 50s, you may have gotten to a comfortable level in your career. And very close to financial independence with 10-20 times your annual expenses. Your children may also be starting to rely less on you.
Distribution Phase – 60s to 80s
In your 60s, you should have accumulated 20-30 times of your annual living expenses and no longer have to work! Your cash cow is mature enough to provide you with income or dividends every month. You are living debt-free after paying off your mortgage.
At age 65, your CPF Life annuity has also kicked in to provide you with hundreds. Your passive income should reach hundreds, if not thousands every month.
How to Accelerate Savings by Investing
Putting your money in the bank is not very efficient. Every single dime can continue to generate more money for you if you allow it to.
Everyone knows that investing can help you build wealth. But this outcome does not come overnight.
Investing can work wonders with a compounding effect. Everyone has a different risk appetite and financial situation. I will advise everyone to actively invest the excess savings in the asset class that matches your risk tolerance – stock market, bonds, property, or even cryptocurrency.
My new favorite high-interest savings account is in Cryptocurrency stable coins (read: USD). In other words, you are basically investing in USD and getting DOUBLE-DIGIT interest rates. As of the date of writing,deposits in USDC and USDT can earn up to 12.73% APY.
To do this, simply transfer it toHodnaultto earnhigh interest inyour cryptocurrency!
Use myreferral link for Hodnaultand you willget US$20 for $1000 worth of deposit!
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Hello! Welcome to Her Wealth Journal!
I’m the Personal Finance Blogger who started a family at 24. And refuse to let this become an excuse for not getting my sh*t together.
At the Her Wealth Journal blog, I share the best money-saving tips, dividend growth investing, passive income ideas, and more. To help you to achieve the financially free lifestyle you’ve always wanted.
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