Social media has turned a lot of us into more curious versions of ourselves. With people posting so much information about themselves online, it's easy enough to determine where your neighbor went out to dinner last night or what car your old college roommate decided to upgrade to.
But one thing people don't tend to post about is the amount of money they have saved for retirement. Clearly, that's just a no from a social media standpoint. And also, some people might be embarrassed by how little long-term savings they have.
If you're 40 years old, it means you probably still have more working years ahead of you than behind you. But you may be wondering how well you're doing on the retirement savings front if you have $40,000 tucked away in your IRA or 401(k). And while there's data that could give you an answer, you should know that the steps you take in the coming years could play more of a role in determining what sort of nest egg you ultimately retire with.
How the average 40-something is doing
Data from Northwestern Mutual finds that the average person in their 40s has $77,400 saved for retirement. So at first glance, with a $40,000 balance, you might assume you're way behind.
However, it's worth noting that the aforementioned data breaks down savings balances by decade, not specific age. Someone who's 48 years old, for example, has had an extra eight years to save and invest. So it's not necessarily fair to compare your balance to the balance of someone almost a decade your senior.
But let's say it is the case that the typical 40-year-old has a lot more retirement savings than you. That's not something to feel bad about automatically.
Maybe you had more financial challenges to overcome than other people did. Maybe you had to pay for college completely on your own. Maybe you had children at a young age and have been paying for their care ever since.
Rather than bemoan the fact that your savings balance may be smaller than that of the typical person your age, instead, recognize that $40,000 is a great start. And if you pledge to build on that balance going forward, you might still end up with a sizable nest egg by the time retirement arrives.
Keep on saving and investing
While $40,000 is a good start on the road to building a nest egg, you probably want to retire with a lot more money than that. But it may be more than possible if you commit to saving and investing in a brokerage account consistently for the remainder of your career.
Let's say you're able to save $400 a month between now and age 65, and that your IRA or 401(k) delivers an average annual 10% return, which is consistent with the stock market's average over the past 50 years. When we add that to your initial $40,000 balance, you're looking at a total of $905,000. That's not shabby at all.
In fact, it might help you to know that in the aforementioned survey, the average person in their 60s had a retirement savings balance of $112,500. So if you're able to accumulate $905,000, you'll be way ahead of the game.
That said, rather than focusing on how your savings balance compares to other people's, a better bet is to focus on yourself. There will always be people in your life who have more money than you do. The key is to spend your energy doing the best you can for your own future, and worry less about how your balance stacks up broadly.
FAQs
Data shows that the average 40-something has $77,400 in retirement savings. If you're 40 with $40,000, you're by no means doomed, but you may want to ramp up your contributions as much as you can. It's also important to invest your savings, so your money is able to grow over time.
How much should be in my retirement account at age 40? ›
Fidelity says by age 40, aim to have a multiple of three times your salary saved up. That means if you're earning $75,000, your retirement account balance should be around $225,000 when you turn 40.
Is 40 too late to save for retirement? ›
Yes, it's very possible to retire comfortably even if you start saving at 40.
What to do if you have no retirement savings at 40? ›
You can catch up on your retirement savings by taking advantage of tax-advantaged retirement accounts like your workplace 401(k) and IRAs, getting (and staying) out of debt, prioritizing saving, and working with a financial advisor.
How much money should a person have in savings when they retire? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
What is good savings at 40? ›
By the time you reach your 40s, you'll want to have around three times your annual salary saved for retirement. By age 50, you'll want to have around six times your salary saved. If you're behind on saving in your 40s and 50s, aim to pay down your debt to free up funds each month.
How aggressive should my 401k be at 40? ›
With this rule, you subtract your age from 100 to get your stock allocation, with the remainder going into bonds. For example, a 40-year-old should have a 60 percent exposure to stocks and 40 percent to bonds, while a 65-year-old should have 35 percent in stocks and 65 percent in bonds.
How do people retire with no savings? ›
If you retire with no money, you'll have to consider ways to create income to pay for your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
Is 40k a lot of money saved? ›
Data shows that the average 40-something has $77,400 in retirement savings. If you're 40 with $40,000, you're by no means doomed, but you may want to ramp up your contributions as much as you can. It's also important to invest your savings, so your money is able to grow over time.
Can I retire at 40 and collect social security? ›
You can stop working before your full retirement age and receive reduced benefits. The earliest age you can start receiving retirement benefits is age 62.
You may have to rely on Social Security
Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit.
How much money does the average 40-year-old have in the bank? ›
Average Savings by Age
| Age Range | Account Balance |
|---|
| Under age 35 | $20,540 |
| Ages 35-44 | $41,540 |
| Ages 45-54 | $71,130 |
| Ages 55-64 | $72,520 |
2 more rows“Take your living expenses for the year and multiply by 25. If you spend $60,000 a year, that's $1.5 million. If you have investable assets of more than that – not including the house you live in – you should theoretically be able to retire at age 40.”
What is a good monthly retirement income? ›
The ideal monthly retirement income for a couple differs for everyone. It depends on your personal preferences, past accomplishments, and retirement plans. Some valuable perspective can be found in the 2022 US Census Bureau's median income for couples 65 and over: $76,490 annually or about $6,374 monthly.
How much do I need to retire if my house is paid off? ›
One rule of thumb is that you'll need 70% of your pre-retirement yearly salary to live comfortably. That might be enough if you've paid off your mortgage and are in excellent health when you kiss the office good-bye.
What is a good pension at 40? ›
To make it simple, one rule of thumb is to aim to have about two-thirds of your salary as an annual income in retirement. So if you earn £40,000 a year, you might want to aim for a retirement income of £26,600.
Is 100k saved by 40 good? ›
You may be starting to think about your retirement goals more seriously. By age 40, you should have saved a little over $185,000 if you're earning an average salary and follow the general guideline that you should have saved about three times your salary by that time.
Can I retire at 62 with $400,000 in 401k? ›
You can retire a little early on $400,000, but it won't be easy. If you have the option of working and saving for a few more years, it will give you a significantly more comfortable retirement.
How many people have $1,000,000 in retirement savings? ›
As of June, there were roughly 497,000 so-called retirement-created millionaires in the U.S., according to the wealth management firm, which analyzed balances across 26,000 of its customers' accounts. Nearly 399,000 Americans also have a least $1 million in an individual retirement account.
