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.
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.
How much should the average 40 year old have in savings? ›
Generally speaking, most financial professionals will tell you that by age 40 you should have at least three times your annual salary saved. Keep in mind that for married couples you should have three times your combined household income.
Is 40k a year good for retirement? ›
According 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.
How much money do you need in the bank to retire at 40? ›
One rule of thumb recommends multiplying your desired annual income in retirement by 25 to come up with a savings goal. So, if you want to have $50,000 a year for 25 years, you'd need $1.25 million.
What is a good 401k balance at age 40? ›
Ideally, you should aim to have around three times your pre-tax salary saved for retirement by the time you enter your 40s in order to maintain your current lifestyle in retirement, according to Fidelity Investments.
What is the average 401k balance for a 40 year old? ›
Average 401(k) Plan Balances by Age
| Age | Average 401(k) Account Balance |
|---|
| 20-29 | $10,500 |
| 30-39 | $38,400 |
| 40-49 | $93,400 |
| 50-59 | $160,000 |
2 more rowsThe average retirement savings a person should have at age 40 varies significantly depending on individual circ*mstances, financial goals, and income levels. Many financial experts suggest you should have 3 times your yearly pre-tax salary saved by 40 years old.
What is considered a good monthly retirement income? ›
As a result, an oft-stated rule of thumb suggests workers can base their retirement on a percentage of their current income. “Seventy to 80% of pre-retirement income is good to shoot for,” said Ben Bakkum, senior investment strategist with New York City financial firm Betterment, in an email.
How much money do most people retire with? ›
The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances.
So for a $50,000 nest egg, that would mean $2,000 of retirement income a year. Even with a decent chunk of cash from Social Security, that may not be enough to live on. But if you're willing to work part-time in retirement, you may find that you can get by quite well thanks to that added income.
Can a retired person live on $45,000 a year? ›
According to the 80% rule, someone who is earning $45,000 at the end of their career would need $36,000 every year in retirement, while someone who is earning $200,000 would need $160,000.
Can I live on $50,000 a year in retirement? ›
For many people, $50,000 is enough income to live comfortably, although your location and lifestyle are important factors. In coastal cities, that money doesn't go as far, but there are certainly households in New York City that live on one or two Social Security incomes amounting to less than $50,000.
Can I retire at 40 with no money? ›
Even if you're 40 years old with nothing saved for retirement, not only is it possible to build a $1 million nest egg by the time you reach your golden years—it might not be as hard as you think to get there.
What is the ideal retirement age? ›
Depending on the year you were born, postponing taking Social Security until age 66 or 67 will allow you to receive full benefits. Based on 2021 data, men retire at an average age of 64.7 years, while women remain at work until age 62.1.
How to retire early with no money? ›
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.
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 should my net worth be at 40? ›
By the time you reach age 40, prevailing wisdom says you should have a net worth equal to about twice your annual salary. Hopefully, you climbed the salary ladder a bit in your 30s, too. If you're making $80,000 annually, for example, your goal should be to have a net worth of $160,000 at age 40.
Is 100k in savings 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.
