For many, their 40s could include any combination of children, a mortgage or bills that arrive every month like clockwork. While everyone’s financial circumstances, lifestyle and future goals are different, being aware of benchmarks can help you know if you’re on the right track or if you need to turbo-charge your savings.
Read more: How Ally Bank’s buckets and boosters help you save
Average retirement savings by age 40
Check out the average retirement savings by age:
Age group | Average retirement savings |
|---|---|
<25 | $6,899 |
25-34 | $42,640 |
35-44 | $103,552 |
45-54 | $188,643 |
55-64 | $271,320 |
65+ | $299,442 |
How much should you have saved by age 40?
As a general rule of thumb, you should aim to have at least three times your salary saved by age 40. For example, if your annual salary is $50,000, your goal might be $150,000 in savings.
How much should you have in your 401(k) by 40?
Similarly, a common savings goal for your 401(k) is three times your salary by age 40.
Key savings categories to prioritize in your 40s
At this stage of life, 40-somethings should prioritize the following expenses.
Emergency savings
Ideally, your emergency fund contains at least three to six months’ worth of living expenses for unforeseen costs like a sudden change in employment or the family pet suffering a major illness.
Health care expense savings
How much money you need for health care costs in retirement depends on:
Where you retire
How healthy you are
How long you live
Consider enrolling and contributing to a health savings account (HSA), which can give you tax benefits.
Retirement planning
If you want to travel the world and treat yourself while doing so, for example, you’ll likely need more than the recommended three times your household income rule. But if you plan on downsizing your home and spending your time and money on the same hobbies you always have, perhaps you might not require quite as much.
Home costs
The typical age of a first-time home buyer is 40 years old, so aim to have money set aside for a down payment, repairs or upgrades.
Family expenses
Your 40s are typically a time of saving for family responsibilities, including:
College: If you want to help your children avoid student loan debt, consider putting money in a 529 College Saving Plan or a savings account that offers a competitive rate of return, such as a certificate of deposit (CD) or a money market account.
Weddings: If you’d like to help with your children’s wedding expenses, you may want to park some money in high-interest savings accounts, or consider longer-term investments.
Read more: Learn more about financial planning at every age
As a general rule of thumb, you should aim to have at least three times your salary saved by age 40.
How to start saving more in your 40s
Even if you haven't saved toward retirement at this stage, you can still make retirement savings a priority.
Step 1: Increase your savings rate gradually
Once you feel comfortable with consistently saving, try gradually increasing your contributions. Over time, these relatively small additions can grow significantly due to compound interest.
Step 2: Maximize employer retirement matches
Because some employers offer an employee match, your workplace retirement plan can provide immediate ROI on your savings. Think of it this way: If you make $75,000 annually, with a 4% employer match, that’s almost $3,000 in free money each year.
Step 3: Reduce high-interest debt
The faster you get out of debt, the more you can contribute toward your retirement savings. Consider prioritizing:
High-interest and variable debt
Delinquent or high-utilization accounts
Student loans
Mortgage or low-interest debt
Step 4: Create a budget
Whether you use an old-fashioned spreadsheet or an app, budgeting can help you get out of debt and contribute to all the different savings goals in your life.
Step 5: Set up recurring transfers
Take a bit of the work off your plate and build your savings faster by:
Automating transfers to retirement accounts
Automating transfers to emergency and short-term savings buckets
Using a budgeting app or recurring schedule to stay consistent
Step 6: Use tools and buckets to organize your savings
Tools like Ally Bank's savings buckets and boosters, which are features of an Ally Bank Savings Account, can help you visualize your goals and save more money. Savings buckets allow you to separate your money so you can easily see what you have set aside for different expenses, while boosters help you automate more savings.
Enter your golden years feeling golden
While these savings benchmarks can be a helpful guide, they're not a verdict on your financial future. If you have more questions, consider meeting with a financial advisor if you haven’t already. By making small, consistent adjustments today, you can start building toward your long-term goals.
