Is 100k emergency fund too much?
Now granted, you might spend more than $5,000 a month if you live in a high-cost area. The point, however, is that the typical consumer generally does not need a $100,000 to $249,000 emergency fund. And if you keep that much money in the bank, you might lose out financially.
Now if you happen to spend $20,000 a month, then sure, $100,000 is a reasonable amount to put in your emergency fund. But most of us don't spend that much on a monthly basis -- not even close.
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
Your emergency fund could be too big if it exceeds three to six months' worth of expenses. That said, everyone has a different financial picture. Some people keep up to a year's worth of savings in an emergency fund, while others might find that sticking to closer to three months frees them up to pursue other goals.
While reaching the $100,000 mark is an admirable achievement, it shouldn't be seen as an end game. Even a six-figure bank account likely won't go far enough in retirement, which could last as long as 30 years.
Most American households have at least $1,000 in checking or savings accounts. But only about 12% have more than $100,000 in checking and savings.
People have different estimates about the best amount to save in an emergency fund, and the answer will depend on your income and spending habits. Generally, your emergency fund should have somewhere between 3 and 6 months of living expenses.
Choose the right career
And one crucial detail to note: Millionaire status doesn't equal a sky-high salary. “Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
Wiping out high-interest debt on a timely basis will reduce the amount of total interest you'll end up paying, and it'll free up money in your budget for other purposes. On the other hand, not having enough emergency savings can lead to even more credit card debt when you're hit with an unplanned expense.
Is 150k in savings good?
If you're naturally frugal and you plan to live a low-key, minimalist lifestyle in retirement then $150,000 might serve you well. On the other hand, if you'd like to enjoy a more lavish lifestyle or you have a serious health issue that results in high out-of-pocket costs, $150,000 may not go that far at all.
Stashing too much money at lower interest rates can mean actually losing money to inflation over time. You could miss out on tax savings. You may be over-contributing to that emergency fund and neglecting tax-advantaged retirement account options, such as a 401(k) or IRA.
A $20,000 emergency fund might cover close to three months of bills, but you might come up a little short. On the other hand, let's imagine your personal spending on essentials amounts to half of that amount each month, or $3,500. In that case, you're in excellent shape with a $20,000 emergency fund.
“By the time you're 40, you should have three times your annual salary saved. Based on the median income for Americans in this age bracket, $100K between 25-30 years old is pretty good; but you would need to increase your savings to reach your age 40 benchmark.”
“By the time you hit 33 years old, you should have $100,000 saved somewhere,” he said, urging viewers that they can accomplish this goal. “Save 20 percent of your paycheck and let the market grow at 5% to 7% per year,” O'Leary said in the video.
- Index funds. ...
- Dividend-paying stocks. ...
- Growth stocks. ...
- Value stocks.
You can still live a fulfilling life as a retiree with little to no savings. It just may look different than you originally planned. With a little pre-planning, relying on Social Security income and making lifestyle modifications—you may be able to meet your retirement needs.
Recent data from Northwestern Mutual shows that the average 30-something has $67,400 saved for retirement. So if you're sitting on a $100,000 savings balance at age 30, it means you're ahead of the game.
| Age range of reference person | Average checking account balance in 2022 | Median checking account balance in 2022 |
|---|---|---|
| Under 35 | $7,355.53 | $1,600.00 |
| 35 to 44 | $15,309.92 | $2,500.00 |
| 45 to 54 | $20,155.22 | $3,400.00 |
| 55 to 64 | $17,515.35 | $3,500.00 |
The general rule of thumb is to keep three to six months' worth of basic essentials stashed in your emergency fund. But how much you need to feel financially secure may differ.
What is the ideal emergency fund?
Optimal size of an emergency fund
Experts generally recommend keeping between three and six months' worth of living expenses in your emergency fund.
The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
According to the U.S. Census, only 15.3% of American households make more than $100,000 annually. A $100,000 salary can yield a monthly income of $8,333.33, a biweekly paycheck of $3,846.15, a weekly income of $1,923.08, and a daily income of $384.62 based on 260 working days per year.
The median salary for Americans is around $70,000 a year, according to the most recent census data from 2021. A salary of $100,000 a year, with the assumption that you are an individual without dependents, would classify an individual as upper-class — but many of these people don't feel rich.
In the US, 18% of individual Americans and 34.4% of households make $100k per year or more. This number has increased by 2.97% in the past five years and has nearly doubled since 1980. However, that doesn't mean all $100k+ earners are evenly spread.
