Research Says You Should Have One Year’s Salary Saved by 30, But Why?

ByDestiny S. Harris

Pre-buy comfort. Set yourself up to never invest again.

Photo by Martin Reisch on Unsplash

Much of the research claims you should have at least one year’s salary saved by 30.

Okay, but why?

Well, here’s what I took away from the advice:

  1. The more you have saved by 30, the more luxurious your retirement years will be.
  2. The more you have saved by 30, the less you’ll have to save going forward.

When you save up a substantial amount in your 20s and 30s, you are pre-buying comfort.

The $500K Scenario by 30

For the person who has $500K saved by 30, they can pretty much sit back and relax the remainder of their life.

All they have to do is keep bringing in income that covers their current expenses, keep saving, keep living within their means, and that’s it.

It actually does not require that much discipline, because most of the discipline has already been implemented with those massive savings.

Even if they want to save more aggressively, they don’t need to increase their savings rate.

All they need to do is increase their interest/compounding rate.

Whenever you don’t want to work harder, set up your money to work harder for you by moving your money into more aggressive assets (but remember this comes with higher risk).

The person who saves at 5% a year ends up with a balance that doesn’t come close to the balance of the person who saves at 20% per year.

Let me break down the numbers for you.

The Final Results at Age 65

5% Return (Conservative): ~$2,758,007

This is a typical projection for a conservative or bond-heavy portfolio after adjusting for inflation.

20% Return (Aggressive): ~$295,334,114

This level of growth usually requires some level of strategy, and I would vouch for conviction as well, but Warren Buffett did it. So it’s possible

Get the Stack
  1. Investing Is the EXIT
  2. Book a 1:1 Strategy Session
  3. Master Your Discipline: Join the Discipline Chamber
  4. Never miss a workout: FL10 minute workouts you can do anywhere

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This article is for informational purposes only and should not be considered financial or legal advice. Consult a financial professional before making major financial decisions.

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