Are you on track to hit your savings goals? Establishing financial objectives is one thing, but hitting those incremental benchmarks along the way is something else entirely. What if you arrived at age 50, only to realize that you’re not going to meet some of those ambitious goals you made?
Goal-setting is a crucial skill, and retirement planning for freelancers is among the most important skills to have. Once you’ve set your goals, though, don’t stop there. Place mile markers along the way to ensure you don’t veer off course.
Here are a few savings benchmarks not to be missed — especially if you’re a freelancer.
In Your 20s: Consistency Over Quantity
If you’re a 20-something freelancer, you have a secret weapon many other professionals don’t have: time. As you consider how much you “should” be saving in your 20s, the surprising answer is that the quantity isn’t as important as your consistency. At this point, a strong habit of saving is more valuable than a big, painful, self-sacrificing lump sum. Not convinced? Take a minute to toy around with the U.S. Securities and Exchange Commission’s compound interest calculator to see exactly why.
In Your 30s: Hitting Your First Big Goal
Are you 30 or above, freelancing to make ends meet? Or are you the 30-something who freelances as a form of investing? Either way, it’s time to take stock of your nest egg and your saving habits.
A few years ago, saving pennies regularly was all you needed to position yourself to achieve your financial goals. Today, though, you should have something to show for your efforts. Some personal finance experts, like MoneyUnder30.com founder David Weliver, say 30-year-olds should have the equivalent of one year’s salary tucked away in either a 401k or a Roth IRA.
So, if your freelance business is currently paying you roughly $50,000 per year, that’s the recommended number to have saved so far. But, like most 30-something solopreneurs hustling to grow a personal brand, this number can take your breath away. After all, that’s a huge sum for anyone to have stashed away, let alone an enterprising adventurer who ditched the employer match in favor of a little freedom. If you’re nowhere near the eye-popping estimate, take heart. You have something much more valuable on your side: There’s still time. Start stashing away at least 15 percent of your income now, and every time you score an extra gig or upsell to a customer, funnel the cushion into your retirement account to start earning interest.
In Your 40s: Ramp Up Your Savings
Your nest egg is such a subjective, individualized topic that no measuring stick can accurately tell you whether you’re exactly on track. However, according to the personal finance experts at CNBC, by the time you’re 40 years old, you should shoot for triple your annual salary. That’s for someone who’d like to retire around age 67 without altering their spending habits too drastically. Most 40-year-olds don’t have nearly that amount saved up, though, as noted by Business Insider. In fact, the median amount saved by working-aged adults is an anemic $5,000. So yes, you should shoot high, but don’t get discouraged if you’re not at three times your annual income. The answer, again, is unsurprisingly simple: Boost your retirement savings contributions now by cutting back where you can, and above all else, be consistent.
In Your 50s and Beyond: Take Stock of Where You Are
Around this age, your peers are earnestly thinking ahead, and, most likely, so are you. It’s time to get more serious than ever about your future lifestyle and to prepare for emergencies if you haven’t already. The ideal by now is to have six to seven times your annual salary saved up. If you don’t, you’ll need to boost your income, cut spending, alter your trajectory (that is, expect to work longer) or do all three. To support the average 50-year-old’s lifestyle, your freelance business must produce much more today than what a 20-year-old can expect to get by on. The good news? It can still be done.
Remember, your retirement lifestyle is a huge determinant in how much you should be saving, so your retirement planning should reflect that. So if you’re feeling ambitious and you’d like to save more now, you’ll live it up later. And conversely, a smaller percentage saved from each paycheck now will result in a quieter, more conservative lifestyle after you’ve sent your last invoice and retired.