How Much Should You Have Saved by 40?

Approaching 40 years of age can be financially eye-opening. 

This is when all the life choices you made over the last two decades start catching up with you… for better or worse.

So, how much should you have saved in your nest egg by 40? Keep reading to find out.

Average Retirement Savings by Age 40

First of all, it’s important to remember that every situation is different. An acceptable savings strategy for one person may not necessarily be the best for another.

That’s because drastic differences in people’s living expenses, family size, annual income, and future retirement benefits all directly impact your savings rate.

With that said, always take your unique circumstances into account. Do you have a cushy pension plan you can rely on for income until you die? If so, you’re one of the lucky ones. Are you living in an expensive area where you’ll need to maintain a six-figure income to achieve a comfortable retirement? Then you better be saving aggressively.

Either way, there are some benchmarks you can follow to stay on track. 

According to a Transamerica Institute study, the median retirement savings amount for people in their 40s is $63,000. For most people, $63,000 is much lower than the leading belief that you should have at least three times your annual salary saved up by age 40. 

This means that if you earn $70,000 each year, you’ll want to have at least $210,000 in retirement savings.

A Look at the Numbers: Your Savings at 40

Next, let’s review the main expense categories you’re likely to see in retirement and how much you should have tucked away to cover each one.

Emergency savings 

For starters, your emergency fund should have enough to cover at least six months’ worth of expenses. 

This is particularly important if you have a family. As you may already know firsthand, families are expensive, and the last thing a family wants to do is run low on cash. As the pandemic has taught us, this can easily happen if you lose your main source of income or face an unexpected financial hurdle. 

Having cash on hand also enables you to avoid debt, which is another key to financial freedom. For example, if you need to buy a car, and pay for it in cash, you can avoid taking out an expensive auto loan.

Emergency Savings Amount: Save up for six months of expenses. For a typical 40-year-old, we’re talking between $20,000 and $40,000. If your living expenses are higher, you’ll need more. You can never have too much set aside. 

Healthcare expense savings

Here’s an unfortunate truth about getting older: Health expenses start to pile up.

According to the Employee Benefits Research Institute, most couples over 65 should have $180,000 to $360,000 saved up to cover out-of-pocket health-related expenses. 

Presently, you might be in good health and not so worried about this. Yet for many people, medical issues start popping up with age. Back problems, eye problems, digestive issues… the list goes on. When you add a spouse and kids to the mix, the costs simply multiply. More trips to the doctor, dentist, pharmacy, optometrist, and so on.  

The smart thing to do is to put money aside in a tax-advantaged health savings account (HSA) if you have access to one. If you can, max out your contributions each year.

If you don’t have an HSA, your other option is to save for medical-related costs in your emergency fund. The last thing you want to do is spiral into debt if you have to cover an expensive medical procedure. Unfortunately, this happens to far too many people. 

Healthcare Expense Savings Amount: By the time you’re 40, couples should have roughly $60,000 saved and individuals around $30,000. If you double that number by the time you’re 50 years old and double it again when you reach 60, you’ll be in decent shape.

Retirement planning

For most people, 40 is a career milestone. At this point, you probably have a decade or two of professional experience on the books. 

If you’ve been diligent about putting money aside, you may be able to start looking at early retirement. Alternatively, if you haven’t been great about saving up to this point, you still have two or three decades ahead of you to catch up. It won’t be easy, but you can still do it.

Those who don’t get serious about a retirement plan could wind up being forced to live off of Social Security someday. That’s not a great outcome. So think about your retirement goals, and get moving.

If you’re not currently using a broker to invest for retirement (e.g., Vanguard, Schwab, or Fidelity, it’s time to find one. You could also consider hiring a financial advisor if you feel you can’t make significant progress on your own.   

General Retirement Savings Amount: As we covered earlier, a common practice is to have at least three times your annual salary saved up by the time you’re 40. So if you make $70,000 a year, have at least $210,000 put away in retirement accounts. If you make $100,000 per year, strive to have at least $300,000 put away. This may sound like a lot of money, but you need a lot of money to retire comfortably.

Home costs

Hopefully, by the time you’re 40, you’ll own a home instead of renting. Homeownership is one of the best personal finance decisions you can make, especially if you have a growing family. 

By investing in your home now, you’re adding to your net worth with each mortgage payment. If you stay in the same home until retirement age, you may just have that home paid off. And, as you imagine, if you don’t owe mortgage payments during retirement, that frees up your cash for other things.

Home Savings Amount: If you don’t own a home yet, you first need to save up a down payment of ideally 20% of the home’s purchase price, plus closing costs. Homeowners, on the other hand, are wise to keep a healthy emergency fund on hand to cover any unforeseen home repairs that will inevitably pop up. 

Family expenses

If you have kids, these next two sub-categories are costs you should consider as well.


People with kids should start putting money aside for college as soon as possible. However, how much you should save largely depends on how many kids you have, where they want to go to school, and where you live. At the same time, it’s impossible to say what college will cost down the road. 

College Savings Amount: Taking all of these factors into consideration, a safe bet is to put aside anywhere from $50,000 to $250,000 for your children’s college savings. The more you save upfront, the less you and your children will be reliant on student loans. 


Having kids also means potentially hosting a wedding at some point. The costs can range wildly, but hopefully by the time your child reaches marriage age, you’ll have an indication of how much money they’ll need from you (if you decide to help them out—and you don’t have to!). 

Remember: Just because you’re fine with an affordable backyard wedding doesn’t mean your kids will want one. 

Wedding Savings Amount: A conservative but also generous wedding gift is $10,000. Many parents spend much more, or none at all. It largely depends on the venue, number of guests, and your relationship with your child. 

Tips for Increasing Retirement Savings

Stick to a budget

Saving is a lot easier when you stick to a budget. Spend some time analyzing your cash flow and put each dollar to work. 

Make no mistake about it: If you want to reach your financial goals in life, you have to stick to a budget regardless of how much you’re bringing in. Budgeting makes it easier to reduce unnecessary spending and easier to allocate money to the right places. 

Consider auto deposits and investments 

Deciding to save and invest is one thing. Sticking to a plan is quite another. 

One of the hardest parts about putting money aside every month is finding the time and motivation to actually do it. For many people, the act of physically moving money out of their checking account and into a savings or retirement account can be difficult. 

Give serious consideration to setting up an auto-deposit plan so you can put more money aside for long-term growth. 

Maximize tax-friendly investments 

To truly grow your retirement savings, you should take advantage of as many tax-friendly retirement accounts as possible. 

For example, if your employer offers a 401(k) with a company match, max that out every year you can. You can also consider contributing to IRAs, HSAs, and 529 plans, each of which offers significant tax benefits. 

Minimize credit card debt

All too often, people spend their 20s piling on credit card debt and their 30s paying it off… leaving them with less money than they need when they approach their 40s and beyond. 

That said, if you’re in credit card debt, don’t let it spiral out of control. Start paying down your debt as quickly as possible. Sadly, some people never pay down their credit and spend their entire life just trying to make their monthly payments.

A good rule of thumb is to use credit cards to your advantage and pay off your balances in full each month. People who are not good at paying their bills on time should probably avoid using credit cards altogether.

Frequently Asked Questions 

What if I don’t have a retirement fund at 40?

If you don’t have a retirement fund at 40, you’re playing with fire. 

Go to a brokerage firm and look into starting a traditional IRA or Roth IRA. Or, go to your employer and see if they offer a 401(k). 

Starting to invest at 40 isn’t the end of the world. You can still reach your financial goals in time if you’re diligent about putting money away. But you need to get moving as soon as possible. 

With investing, time is key. Every day you waste, you won’t get back.

Should I automate my savings plan?

Automating saving is one of the best ways to ensure you put enough money aside to cover emergencies and provide for your family. 

Talk to your bank about setting up automatic savings deposits if it makes sense. Remember that you need to have enough money in your checking account or savings account to make payments, or you could potentially get hit with overdraft fees. 

How can I increase my household income?

To increase your household income, consider picking up a second or third job. Start a side hustle such as building websites, walking dogs, babysitting, or driving for a rideshare company. The more money you bring in, the easier it is to meet your savings goals. 

You can also consider going to your employer and negotiating a raise. Just make sure it’s a good time to do so—meaning the company is profiting and you’re bringing value to your team. 

How can I improve my financial future?

They say that in life, showing up is half the battle. When was the last time you made financial management a priority for yourself? If you don’t take responsibility for your finances, nobody else will.

Take the time to do a self-audit and form a new financial plan. Overhaul your saving and investing strategy to make sure your money is working as hard as possible.

The Bottom Line

Money starts to take on a different level of importance in your 40s. You are now moving into your middle age and this can be a scary concept for some people. 

The fact is that many American millennials are behind in their savings goals and lack adequate retirement income. What’s more, many people in this age group aren’t able to make ends meet during a financial emergency and have to resort to loans and lines of credit from financial services providers for basic living expenses. 

Don’t let this happen to you. Stop thinking about the short-term, and start thinking long-term by saving and investing while you’re still young. Maximize the power of compounding interest and build a solid financial future for yourself. 

Trust me: you’ll be glad you did!

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