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 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.
How much does the average 40 year old have in savings? ›
But the good news is that they're also in the prime of their career, having worked their way up the ladder over the past two decades. When considering average savings by age 40, data shows you should have at least $17,799 to $35,599 in savings and $185,811 (or 3 times your income) in retirement savings.
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 is enough to retire at 40? ›
By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds.
Where should I be financially at 40? ›
While many experts say that you should have three times your salary saved by 40, the average U.S. household headed by those 44-49 has only $81,347 saved for retirement according to the Economic Policy Institute.
What is a good pension at 40? ›
Using your salary to determine your pension at 40
There's an old general rule of thumb for working out how much you should have in your pension at 40, and it's very old fashioned, so we're not recommending it, but it's good to know. You should have 1.5x your current annual salary in your pension pot by age 40.
Is 40k savings good? ›
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.
What's a good monthly retirement income? ›
Many retirees fall far short of that amount, but their savings may be supplemented with other forms of 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.
Is 40K a year poverty? ›
These guidelines are adjusted each year for inflation. In 2023, the federal poverty level definition of low income for a single-person household is $14,580 annually. Each additional person in the household adds $5,140 to the total. For example, the poverty guideline is $30,000 per year for a family of four.
Well, it depends. 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? ›
Overall total average payments for the state of California: Total number of beneficiaries: 6,166,205. Total benefits: $9,340,498,000. Average total benefits: $1,515.
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.
What is a comfortable retirement income? ›
The definition of a comfortable retirement differs from person to person and depends on things like the number of holidays you plan to take each year. However, some experts have suggested you could maintain a comfortable lifestyle with a pension income between half and two thirds of your final working salary.
Is retiring at 40 realistic? ›
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.
How much should my 401k be worth at 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 many people have $1,000,000 in retirement savings? ›
According to the Federal Reserve's latest Survey of Consumer Finances, only about 10% of American retirees have managed to save $1 million or more.
Is 100k in savings by 40% good? ›
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.
