How Much Should I Have Saved for Retirement by 40?
Rules of thumb vary. Working backward from a retirement target shows one way to estimate it. In our example, an $80,000 earner needs about three times salary saved by 40.
Quick answer
There's no universal number, but you can estimate yours by working backward from a retirement target and your future savings. In our hypothetical example, an $80,000 earner who saves 14% a year (including an employer match) needs about $238,000, roughly three times salary, saved by 40 to reach a $1.1 million target at 65.
Working it backward
Assumptions, all hypothetical and in today's dollars:
- Salary: $80,000
- Retirement target at 65: $1,100,000; see how much you need to retire
- Savings from 40 to 65: 14% of pay, or $11,200 a year
- Return above inflation: 4% a year
Show the numbers behind this chart
| Value at 65 | |
|---|---|
| Savings at 40, grown to 65 | $633,566 |
| Contributions from 40 to 65, grown | $466,434 |
If you're behind
- Increase your savings rate, especially as income rises; see lifestyle inflation.
- Capture the full employer match; see 401(k) basics.
- Plan to use catch-up contributions after 50.
- Consider working a bit longer or delaying Social Security; see when to claim.
The takeaway
Rules of thumb are a start. Working backward from your own target, savings rate, and timeline gives a number you can actually act on.
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