How much you should save in your 20s, 30s, 40s and beyond - Blog - BetterSaver
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How much you should save in your 20s, 30s, 40s and beyond

June 21, 2021

Have you thought about your retirement? It seems like a long way off, we get that. But the longer you put it off, the harder it will be to save for it.

As a general rule, most experts recommend saving 15% of your income every year. Investing this much will likely mean you save enough to enjoy a retirement lifestyle similar to your pre-retirement way of living. But what does that look like exactly?

We put together this guide to saving for retirement at each decade of your life. If you are in your 20s or 30s and start now, the road ahead will be much easier (and a more comfortable ride!) for you. Let’s take a look.

20s: Build savings habits

At this point, you’re in the entry level of your career. You’re living independently, making your own decisions and figuring out how everything works in life. It’s an exciting time!

When it comes to thinking about retirement, you have a major advantage of time on your side.

Thanks to good old compound interest, anything you can save and invest now will multiply over time. Even if you start small, starting now is your best bet. By having automatic deductions from your pay put into savings, you get used to living below your means without having to think about it.

KiwiSaver is the easiest way to get started saving for your financial future. Automatic deductions are taken from your pay each week. The maximum contribution rate is 10%, and your employer has to contribute at least 3%, so putting those two together gets you close to hitting the 15% goal right off the bat.

Here’s an example of what you can save by sorting your KiwiSaver fund now:

The average annual income for a 25-year-old in NZ is just over $45,000 (as of 2020). Using a KiwiSaver calculator, we put in a life expectancy of 90 years of age, an expected retirement age of 65, and assume your employer contributes their minimum required contribution of 3%.

According to the calculator, if you invest in a Growth Fund and contribute the minimum 3%, by age 65 you might have $245,617. This would give you $264 per week until age 90.

If you keep all information the same but increase your contribution rate to 10%, you could have $525,492 in your KiwiSaver account, providing you with $566 per week until age 90.

Of course these are estimates, but it shows how the financial decisions you make now can impact your lifestyle in your golden years. To put it in perspective, a 3% contribution now based on the average wage would be just under $26 per week, while a 10% contribution would shift almost $86 per week from your pay into your KiwiSaver investment.

Even if you can’t do the full 10%, aim to increase your contribution rate as soon as you can. Every increase in percentage above the minimum means more money is invested for your retirement. And, check to make sure you’re in the right fund for you.

30s: Earn more, spend less

By the time you’re in your 30s, you will likely have advanced in your career and can expect to be earning more. But this is the time when life tends to get more expensive. You might be looking at buying a house, having kids, or enjoying the benefits of a dual-income household by splashing out on treats. A lot of us tend to spend more as we earn more. But, we still need to keep up our savings habits. Or, if you didn’t save in your 20s, get on the ball.

Let’s use our previous example, except now you’re 35 and earn an average annual wage of $56,000. If you start contributing to your KiwiSaver account now, in a Growth Fund at the minimum contribution rate you’re estimated to have $159,676 saved up by age 65 for an income of $165 per week until age 90. At the max contribution rate, your estimate jumps to $355,805, or $367 per week. If you are in a balanced or conservative fund, your estimated earnings are less. It’s crucial to make sure you choose the right fund.

Clearly if you did not get a jump start in your twenties, now is the time to increase your contribution rate to really make a difference in your retirement fund. Make extra contributions to hit the 15% goal, or look at starting new investments. Check out our savings tips to find areas where you can save and redirect that money to investing. Every little bit counts.

40s: Focus on saving

First, it is never too late to start saving. If you have waited until now to start, you’ll have to take a serious approach to planning but it is not impossible to put aside a decent amount for your retirement.

Let’s plug the numbers into our trusty example. You’re 45. Your income matches the annual average for your age group at just over $64,000. You contribute at the max rate of 10% (let’s be real, you likely don’t have time to mess around with minimum contribution rates) in a Growth Fund. Your estimated KiwiSaver fund balance at age 65 is $304,384, or $314 per week.

That isn’t likely to be enough to live on, so you’ll have to have some other means of savings or investments. It’s best to get advice from a financial advisor to work out an investment strategy that will set you up for independent living later on in life.

50s: Stay on track

By now, hopefully you have built up significant savings and can start to imagine what your retired life will look like. You should have a pretty solid idea of just how much you will need to live on. If you’re not on track to meet that, it’s time to make saving a priority.

Let’s face it, at this point in life we’re likely to have more medical bills. Aging is inevitable and our bodies don’t bounce back like they did when we were younger. By starting your savings early in life, you’ll be more likely to ride out these financial bumps without major repercussions.

If you are in this decade of your life and haven’t saved for your retirement, talk to a financial advisor ASAP. They can give you professional expert advice for the best strategy.

60s: Enjoy your retirement

By now you should have your retirement fund saved up. About a third of Kiwis continue some form of paid work past age 65 but you can’t rely on having that ability. At age 65, you will be eligible to start receiving the NZ Super to add to your income.

Time to kick back and enjoy your retirement, whatever that might mean for you - travel, visiting grandkids, or ticking items off your bucket list. All your hard work and planning means you should be able to do what you want and have a steady income. Getting advice from a financial planner at this stage will help ensure you continue to make smart money decisions.

The best advice at any age

No matter your age, you stand to benefit from seeking advice from a financial advisor. They will focus on your situation and goals to help you create the best plan to save for retirement.

KiwiSaver can seem confusing, but it is the simplest way to get started saving. At BetterSaver we are committed to making it easy by doing all the hard work for you. Our online Fund Finder can get you in the right KiwiSaver fund in just five minutes.

The best time to start saving is right now.