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.
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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.
What should my retirement balance be at 40? ›
By age 40, your savings goals should be somewhere in the neighborhood of three times that amount. According to 2023 data from the U.S. Bureau of Labor Statistics, the average annual income hovers around $62,000. This means retirement savings goals for 40-somethings should tip the scales at around $200,000.
How much should the average 40 year old have in savings? ›
What Is the Recommended Retirement Savings By Age?
| Age | Recommended Retirement Savings |
|---|
| Age 40 | 3x annual salary |
| Age 45 | 4x annual salary |
| Age 50 | 6x annual salary |
| Age 55 | 7x annual salary |
4 more rowsAccording to the rule, you make a 4% withdrawal from your accounts in the first year and adjust your withdrawal rate for inflation over the following years. Let's say you plan on living on $40,000 a year during retirement. According to the 4% rule, you'd need $1,000,000 to retire, or 25 times your annual expenses.
Is 40 too old to save for retirement? ›
Yes, it's very possible to retire comfortably even if you start saving at 40. Regular contributions to your retirement accounts will go a long way toward making that dream a reality. Take advantage of catch-up contributions after the age of 50.
What is a good 401k balance 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. If your employer offers both a traditional and Roth 401(k), you might want to divide your savings between the two.
How much should I have in my TSP at 40? ›
Age 40—three times annual salary. Age 45—four times annual salary. Age 50—five times annual salary. Age 55—six times annual salary.
What is a good monthly retirement income? ›
Average Monthly Retirement Income
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
How much does the average 40 year old have in the bank? ›
Americans at this life stage are reflected in Federal Reserve statistics covering people ages 35 to 44. The Fed's most recent numbers show the average savings for the age group that includes 40-year-olds is $41,540. The median savings is $7,500.
How many people have $1000000 in retirement savings? ›
However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.
A $40,000 salary may be sufficient for an individual in a low-cost area, but it may not be enough for a family to live comfortably in most parts of the US. Rising inflation has made it more challenging to live on a $40,000 salary, but it still exceeds the poverty threshold for families.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Can you live on $3,000 a month in retirement? ›
That means that even if you're not one of those lucky few who have $1 million or more socked away, you can still retire well, so long as you keep your monthly budget under $3,000 a month.
How aggressive should my 401k be at 45? ›
Rowe Price analysis suggests that 45-year-olds should have three times their current income set aside for retirement.
How do people retire with no savings? ›
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. You get less than your full benefit if you file before your full retirement age.
Is 42 too late to start saving for retirement? ›
It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.
Can I retire at 62 with $400,000 in 401k? ›
If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.
Can I retire at 60 with 300k? ›
£300k in a pension isn't a huge amount to retire on at the fairly young age of 60, but it's possible for certain lifestyles depending on how your pension fund performs while you're retired and how much you need to live on.
