The 30/30/30 Plan: How to Save $30K by Age 30 on a Salary of $30K

A Twitter war recently broke out after author and financial guru Jean Chatzky tweeted out: “By the time you’re 30, you should aim to have 1x your annual income set aside for retirement.” 

She even went on to say that by the time you’re 40 you should have 3x; at 50 it should be 6x; at 60, 8x; and by retirement, 10x. As you can imagine, everyone fired back. And not in a good way. 

But if Chatzky has the financial chops and the 20-30 somethings are out there trying to survive, pay back student loan debt, and save, all at the same time, who should you believe?

It's a question with a few different answers. 

The good news: a couple of millennial finance bloggers decided to double-check her numbers to see how valid they are. And what they discovered will change the way you think about saving money in your 20s and beyond.

The question: can you save $1,000,000 on an average income?

Yes, say the finance bloggers at Paychecks & Balances.

First off, they define an average income as $30,622. But why this amount? 

Well, according to the U.S. Bureau of Labor Statistics, the average income in 2015 was $69,629. That is a whole lot of money for someone just starting out in the job market. 

So, Paychecks and Balances decided to use the median wage of $30,622 (assuming that 50% of people earn more and 50% earn less) in order to illustrate their scenario — a number that is more in-line with what recent college grads are making. 

Let’s get down to the nitty-gritty…

According to their calculations, if you start setting aside money at age 20 and save at least $253 per month with modest returns of 7% over 47 years, you can reach $1 million for retirement by age 67. 

Even without the magic of compound interest, you'd be saving $3,036 per year ... which means you'd hit $30,360 by age 30. Voila! The 30/30/30 Plan is achieved! (But seriously, don't stick that money in your mattress ... go get yourself some compound-interest action.)

Sounds like a great plan, right? Sure, unless you’re stressed about having student loans, and a car payment, and rent, and, and, and — the list goes on and on. And besides ... who actually started saving money at age 20?

But let's go with this hypothetical scenario for a minute. Think of it this way: $253 per month is 10% of your annual income if you make the median wage above.. That means you have 90% of your annual income to spend on student loan debt, rent, mortgage, car payments, coffee, etc. 

When you consider it from that perspective, saving $253 each month seems a bit more reasonable. Save 10% of your income, live on the other 90%. 

Now let's dump the hypotheticals and talk about what your situation actually is. 

But I'm already behind ...

What happens if you’re in your 30’s and haven’t followed this advice or you’re in your 20’s and thinking “there’s no way?”

Fortunately, there is no one set rule when it comes to retirement. Even Chatzky chimed in and said those benchmarks might seem high, but the whole point is to aim for them. 

So, if you’re nowhere near Chatzky’s recommendations, why not aim for half of what she laid out? 

For example:

• Instead of 1x of your income set aside by age 30, make a goal of 1/2x your income by 30.
• At 40, you could shoot for 1 1/2x your income.
• Age 50, you can aim for 3x your annual income. 
• By age 60, you can hopefully, be at 6x your income. This may seem high, but it’s still less than Chatzky’s original tweet which said to have 8x your annual income set aside by age 60.

Will this get you to $1,000,000 by the time you want to retire? Maybe not, but it will help you set aside a reasonable amount of money for retirement — and retiring with 6x your income is better than having no retirement at all. 

Where can you get the money?

If you're struggling with student loan debt, saving anything for retirement may seem out of the question.

But check this out: If you refinance your student loans, you can save $253 per month (on average). 

When you refinance your student loans, you can get a lower interest rate that will allow you to lower your monthly payment. That can improve your monthly cash flow, allowing you to direct more money towards your retirement. 

See also: Everything You Need to Know About Student Loan Refinancing 

Check out our Student Loan Refinancing Calculator to find out how much you could save.