Planning for Financial Security: How Much Liquid Cash Should You Have by Age 36?

As we approach the age of 36, many of us start to wonder about our financial security and the steps we need to take to ensure a comfortable retirement. This article will explore the importance of liquid cash and its role in financial planning, as well as the actual savings of the average person at this age.

What is Liquid Cash?

Liquid cash refers to funds that are readily available and easily accessible. This typically includes cash in hand or funds in a savings account that can be accessed without penalty. Unlike other investment accounts that may require liquidation or withdrawal penalties, liquid cash is accessible at any time with no restrictions.

How Much Liquid Cash Should You Have?

Most experts recommend maintaining a minimum of three months' worth of living expenses in a liquid cash account. However, if your job is particularly risky or unstable, it is advisable to have six months' worth of expenses saved. This amount of liquid cash can provide a safety net in case of unexpected events such as job loss or medical emergencies.

The Reality of Retirement Savings

A recent survey by the Transamerica Center for Retirement Studies provides insight into the actual savings of individuals in their 30s. According to the data:

Americans in their 20s: $16,000 Americans in their 30s: $45,000 Americans in their 40s: $63,000

By 36, the median retirement savings is approximately $63,000. This figure can be seen as a benchmark, but it may not be sufficient for a comfortable retirement. Many individuals aim for a retirement savings goal of around $2 million to supplement Social Security benefits.

Strategies for Building Liquid Cash and Retirement Savings

To build a solid foundation of financial security, consider the following strategies:

1. Paying Off Debt

Avoid carrying debt as it can hinder your ability to save and invest effectively. Paying off high-interest debt, such as credit card balances, can free up funds that you can redirect towards your savings goals.

2. Saving Consistently

Establish a savings habit and stick to it. Whether through a retirement account or a savings account, the key is to make saving a regular part of your financial routine.

3. Invest in Index Funds

Consider investing in low-cost index funds like those offered by Vanguard or Fidelity. These funds provide diversification and long-term growth potential, which can help you achieve your financial goals.

4. Retirement Planning

Start investing in your retirement accounts as soon as possible, ideally at the start of your career. The power of compound interest can work in your favor over time, so the earlier you begin, the better.

5. Flexibility and Risk Management

Keep some of your savings in liquid form to manage financial risks. This liquidity can help you weather unexpected challenges and ensure that you have funds available when needed.

Conclusion

While having 200k in retirement savings by age 36 is commendable, it may not be enough to ensure a comfortable retirement. By focusing on building a solid foundation of liquid cash and retirement savings, you can take control of your financial future. Remember, the goal is to tailor your savings strategy to your specific needs and financial goals, rather than merely comparing yourself to the average person.