One of the most common questions
I get from my clients is
Hey Thomas,
I am in my 20s, 30s or 40s,
how much money should I have saved by now.
Am I considered to be ok?
Well, in this video
I’m going to answer that question and
break it down by age group so you can know
exactly where you stand.
Now of course,
before I proceed this is just an estimate
so don’t freak out if you feel far behind.
In bigger cities like Vancouver and Toronto
where cost of living is high,
it can be especially tougher to save.
But as always,
it’s important to have a hard look at where
you stand and to keep measuring goal posts.
This will help you improve your saving habits
and get towards retirement.
Let’s get started!
let’s start with you’re around the age of 20.
At this age,
you’re likely still in school and you might be in debt
from student loans and working a minimum wage job.
At this time in your life,
you’re likely to have a net worth
of negative of around $20,000.
Now this debt is from student loans or
from your parent but hopefully you’re getting
the right education and skill that will
increase your net worth later on.
So knowing this fact,
the number one thing you should focus on
is doing well in school and graduating.
According to Stats Canada,
those who earn advanced degrees like in law school,
medical school, and MBAs earn almost double
over their lifetime than those whose
highest education is a high school diploma.
Now if you can find a part-time or weekend job
to help pay off some of that debt even better.
This will put you in a better position
later on in your life.
Also, something important in your twenties
is to establish good credit.
This will help you get cheaper rates on car loans,
mortgages and much more when you need those.
In the future,
I will make a video on
how to increase your credit score.
But for now,
if you have any phone bills or other bills,
make sure it’s under your name not on your parents.
Also, You might want to consider opening up a
credit card but keep in mind don’t over spend it.
Oh and try to start setting aside
some money for investing.
I know it can be difficult to think
about saving when you still in school,
but it will really pay off down the road
and establish good financial habits
which will serve you later on.
And good investing actually starts with having an
emergency fund so that all your bases are covered.
After you have an emergency fund,
look into investing into a tax free saving account.
With a TSFA,
which you have $6,000 room to contribute per year,
and all your profit are going to be tax-free
by the time you withdraw that money.
And That will help you
with your future financial goals.
Now let’s go to the next age bracket,
which is your 30s.
The amount that you should have saved by
the age of 30 is equivalent to your annual salary.
So that means if you are making $48,000 a year
which is the average salary in your thirties,
you should have around $48,000 saved.
Remember, however, that this is just an estimate.
If you’re 30 and you don’t have anywhere
that amount saved please don’t panic.
You still have plenty of time to catch up.
This video is only a thought exercise designed
to give you an idea of where you should be at
and help you think about finances more.
In my opinion,
there are a few goals you should shoot for
at the age of 30.
Number one,
you should be systematically investing and
saving around 20 to 30% of your income.
If you can’t afford 30% obviously saving
some money is better than nothing.
And at the age of 30, as I mentioned,
you still have a lot of time on your side.
A second goal is to be debt smart in your thirties,
or at least have a plan to become one.
What I meant is to pay off student loan, a
void credit card overdue.
Don’t spend too much on car loan.
Have a line of credit right.
If you’re struggling with this,
talk to a financial advisor and make a game plan
on how you can reduce your expenses
and increase your income.
And in the meantime,
consider having a life insurance,
because with your youth,
you can get it at a very low cost.
And you should have the cashflow to do this.
The name of the game is asset acculation in your 30s.
And we should have a
defensive and offensive strategy for that.
So now we come to the 40s.
The median net worth of a Canadian
in their 40s is about $174, 000.
Most experts agree that by the age of 40,
you should have around three times,
your salary saved up for retirement.
Having three times your salary saved up though means
that it'll be a lot easier to compound and
invest your savings so that you can easily
live off your investments in retirement.
At the age of 40,
I think there are a few goals you should be shooting for.
Number one,
you should have a number in mind
for how much you want to retire.
You're likely more than
two decades away from retirement,
but a good rule of thumb is that, as mentioned,
you want to be able to live off of 4% to 6%
of your total investible assets in retirement.
In 2015 a BMO wealth management study found
that retired Canadians spend an average
of $28,800 per year for basic need.
Now fast forward and adjusting for inflation
that works out to around $32,000 per year.
That means if you retire at the age of 70
and you live until your 95,
you’ll need to have about $1 million on hand
if you want to live comfortably.
So if you have $1 million invested generating
you say 6 percent a year,
that means you were getting
$60,000 every single year.
That should put you in a good position
when calculating in inflation.
Our second goal is to be ready for big expense.
A lot of Canadians failed to retire early
because of unexpected expense.
In theory,
your parents are in their 70 or 80s already.
And some times they need financial support as well.
And your might want to give a
better education for your kids so if you're
saving for a college fund for your kids,
this might be your biggest goal in your forties as well.
Lastly, at the age of 40,
you should, at this point,
have a game plan about retirement.
For example,
It could be managing your finances to the point
where you'll aquire more than one asset class.
For example invest into an investment property
instead putting everything in the stock market.
So that was the age of 40
let's say were at the age of 50.
This is the home stretch.
The median net worth for someone who is
the age of 50 is around $236,000 but
I personally recommend double of that amount.
Which is around $500,000
Again don’t worry if this doesn’t seem realistic.
I think there are four big goals here in your fifties.
Number one,
if you have a mortgage,
your 30-year mortgage is likely going to be almost done.
I would prioritize paying off your home so
that you can live a life without any debt burden.
Number two,
diversify your investments even further,
perhaps invest in 3 – 4 different asset classes.
Like some in stock market. Some in real estate.
Some in commodities.
And time to shift your allocation towards
more safe holdings for retirement.
Number three,
it’s your pre retirement planning.
For example.
If you have rrsp,
should you consider withdraw it now or later?
Or should you withdraw CPP at age 60?
Or at age 65?
AS I always say,
CRA is always the smartest person in the room.
And the only way to reduce your tax is through time.
The last one is if you were procrastinating and
haven’t thought about how much you’ll need
to live off of in retirement,
now is the time to sit down with a financial advisor
to discuss about your retirement plan.
Now let’s move on to your 60s.
Right now according to Statistics Canada,
the median net worth of someone
at the age of 60 is around $320,200
as you can see that is a far cry from having
$1 million saved at retirement as I mentioned
at the beginning of this video.
But does that mean,
I cannot retire if I don’t have a million dollars
in my bank account.
As I mentioned, having a million dollar
will put you a comfortable position to retire
but you might able to live by with less.
We might need multiple stategies in that scenario.
The number one goal is to have your house
paid off by the time you reach your 60s.
You next goal should be examining how you
want to spend your time and what you
want to do with the rest of your life.
Remember,
there is go go year, slow go years, and no go years.
And each phase require different income.
But always Have fun.
Spend time with your family and friends.
Try to cross off some of those bucket list items.
And that wraps it up for the age of 60 and onward.
As you can see,
every age group will have
different challenges and concern.
having a proper plan will make your life a lot
easier and able to enjoy and explore more!
I hope this video can give you a head start!
Let me know if you have any more questions?
I'd love to hear more from you guys
Alright Thanks so much for watching!
This is Thomas!
And I will see you in the next video!