How Much Money Should You Have Saved by Age 40?

How Much Should I Have Saved for Retirement by 40?

Financial planning firm Fidelity recommends saving three times your salary for retirement by age 40. That means if you earn $50,000 per year, your goal by age 40 will be to have saved $150,000 across your retirement accounts, including 401(k)s and individual retirement accounts (IRAs).

Fidelity got to this number by assuming you'll retire at 67 and maintain your current standard of living in retirement, which typically requires saving 10 times your income by age 67. They also presume that you'll start saving at age 25 and put away 15% of your income annually for retirement, with more than half your retirement savings invested in stocks.

An alternative guideline comes from financial planning and insurance firm MassMutual, which recommends saving two to three times your salary by age 40 and three to four times your salary by age 45. That means that at age 40, if you realize you're not on track, you may—with a higher income than you had in your 20s and 30s—be able to bolster your savings in your 40s and still meet the experts' recommendations.

Learn more: Ways to Save More for Retirement

What to Consider When Saving for Retirement

No one's life, career or financial journey is the same, which can make rules of thumb regarding savings goals seem unrealistic. Still, having a guideline can encourage you to kick-start your savings plans, or it can help you relax knowing you're making good progress toward retirement preparedness.

Here are the personal preferences and life decisions that may lead to a different savings goal than what experts recommend:

• When you plan to retire: If you'd like to work past age 67, even part-time, you may be able to save less. On the other hand, you may dream of exiting the workforce sooner, which could require more savings. You can't always control when you retire, however, such as in the case of sudden health problems or your employer's offer of an early retirement package. So it's wise to plan for a typical retirement age of 67, which is when those born after 1960 can get full Social Security benefits, and make the choice on whether to continue to work later on.
• Whether you want to spend lavishly or frugally in retirement: Similarly, think about the type of lifestyle you'd like in retirement. Maybe you're happy to stay in the same neighborhood and help raise grandkids—or perhaps you'd like to travel frequently or live in a dream locale with a higher overall cost of living.
• Your spouse's age: If you're planning to retire alongside a partner, their plans may affect your own. For example, if your partner is much older, you may want to retire alongside them, creating an earlier retirement date for you. Or if they're younger, you may continue to work until they're ready to retire, allowing you to save slightly less now.
• Your health: It's wise to save extra if you have chronic illnesses that may lead to high health care costs in retirement.

How to Save More Money

If you're feeling overwhelmed by these saving recommendations, know that it's never too late to give your retirement or emergency fund a boost.

To save more for retirement, take these steps:

• Take advantage of an employer match. Check whether your employer matches your 401(k) contributions. As an incentive to get you to save, companies may contribute up to 3% of your salary, for example, if you contribute at least that amount to your 401(k). Choosing not to take advantage of this incentive could mean leaving free money on the table and missing out on a substantial sum over time.
• DIY your retirement plan if necessary. Even if your employer doesn't provide a match, or you don't have access to a 401(k) at all, you can create your own savings plan with an IRA or similar retirement investment tool. There are solo 401(k) options for those who are self-employed, for example.
• Save more as you earn more. Make regular contributions to your retirement account, and every time you get a raise, increase the amount you contribute from each paycheck. Put half of your tax refund or work bonus into your retirement account each year. Stay motivated by celebrating whenever you meet milestones, and get specific about the kind of retirement you want so you have concrete goals to work toward.
• Audit your expenses. Additionally, take a close look at your budget and cut back on unnecessary expenses to increase the amount you're putting into your retirement savings. If you're feeling significantly behind, consider adding to your income by taking on freelance or gig work so you can save more.

Learn more: How Much Should I Save Each Month?

The Bottom Line

Saving guidelines can be worthwhile, but only as a starting point. It's best to customize your retirement goals to your own situation, and to remember that saving for retirement is just one element of your financial life.

In your 40s, get clear on the standard of living you plan for in retirement, the age you'll likely stop working and the expenses that might make it difficult to meet your savings goals in the meantime. Use your income to build up a retirement account and to fortify your emergency fund, and remember to keep saving even when priorities change or additional ones come up.

While having saved three times your salary for retirement by age 40 is the ideal scenario, getting as close as possible based on your current circumstances is a worthy goal.