How much should i have saved at 40

Are you trying to figure out how much to save for retirement? While the average retirement savings by age can give you a good scale to determine how you compare to the general population, it's not the only factor to consider when calculating how much money to save for retirement. Aside from age, other factors—such as your lifestyle and income—also play key roles in determining how much you should set aside for your golden years. 

Here's a breakdown of the average retirement savings by age, how much you should be saving for retirement by age, as well as other factors to consider when calculating how much money you may need to retire.

Average Retirement Savings by Age

According to the 2019-2020 Federal Reserve SCF data, the average retirement savings by age in the U.S. are as follows:

• Ages 18-24: $4,745.25
• Ages 25-29: $9,408.51
• Ages 30-34: $21,731.92
• Ages 35-39: $48,710.27
• Ages 40-44: $101,899.22
• Ages 45-49: $148,950.14
• Ages 50-54: $146,068.38
• Ages 55-59: $223,493.56
• Ages 60-64: $221,451.67
• Ages 65-69: $206,819.35

According to Northwestern Mutual's 2021 Planning & Progress Study, there are signs that Americans may be increasing their personal savings. The average personal savings increased by 10%: from $65,900 in 2020 to $73,100 in 2021. Likewise, the average retirement savings increased by 13%: from $87,500 to $98,800.

Median Retirement Savings by Age

According to the latest Survey of Consumer Finances (SCF) by the Federal Reserve, the median retirement savings by age in the U.S. is:

• Americans younger than 35: $13,000
• Americans aged 35-44: $60,000
• Americans aged 45-54: $100,000
• Americans aged 55-64: $134,000
• Americans aged 65-74: $164,000
• Americans aged 75+: $83,000

What is the Recommended Retirement Savings by Age?

Your age can serve as a benchmark for calculating how much to save for retirement. For instance, you could look to the 10X income rule: A Fidelity study estimates that you need 10x your income saved by age 67 to generally maintain your current lifestyle in retirement. Here are the guidelines on how much you should have saved at key stages throughout your life:

• Age 30: 1X annual salary
• Age 40: 3X annual salary
• Age 50: 6X annual salary
• Age 60: 8X annual salary
• Age 67: 10X annual salary

That means that a 35-year-old making $45,000 a year should have up to $90,000 (2X their income) saved in their retirement accounts—which is more than the median and average of what most Americans have saved.

Average Savings By Age

The average personal savings also varies by generation. According to the latest SCF, the average transaction account balance (which combines checking and savings) for all families was $41,600 in 2019. But the mean transaction account balances varied by age:

• Americans under the age of 35: $11,250
• Americans aged 35 to 44: $27,910
• Americans aged 45 to 54: $48,200
• Americans aged 55-64: $57,670
• Americans aged 65-74: $60,410
• Americans aged 75+: $55,320

However, there are complex generational changes at play. For example, Millennials (those born between 1981 and 1996) tend to spend more on housing than Boomers (who were born between 1946 and 1964), which means they generally have less money to contribute towards their retirement savings. Meanwhile, those in Gen X (who were born between 1965 and 1980) have the highest income of any generation today and tend to spend the most. Overall, all three generations tend to save less than is recommended by experts.

The youngest generation, Gen Z (those born between 1997 and 2012), tends to have a different approach to money, with many worried about taking on student loan debt to go to college. This means that while they save less than Millennials, they are in a lot less debt, which is likely to increase their retirement savings options as they age.

How Much Money You Need to Retire

Looking at the national average and median savings for retirement by age can be useful for comparison purposes, but it doesn't capture where you're at in your savings journey. Ultimately, there's no magic number that suits everyone's financial circumstances, and there are different ways to calculate how much money to save for retirement. To nail down how much you need to retire, consider the following factors:

How Much of Your Income Can You Afford to Save?

Many financial advisors suggest saving 10–15% of your gross income, starting in your 20s. That's in addition to money set aside for short-term goals, such as buying a new car or emergencies.

However, this percentage hinges on your current income and budget. How much can you comfortably save each month towards your retirement? For example, a 20-something new graduate who just starting their career and paying off student loans may only be able to invest 3-5% of their gross income. Whereas a debt-free 40-something with a high income could save more aggressively, investing up to 25% of their salary.

What is Your Target Retirement Date?

The target date for retirement is the closest year you plan to retire, which for most is around the age of 65. The year you want to retire can influence how much you need to save for retirement, as well as your retirement investing strategy. For instance, someone who plans to retire at the age of 55 or younger will need to save more aggressively when they are younger than someone who plans to retire at 65.

To calculate your target retirement date, you need to add your birth year to the year you plan to retire. For example, if you were born in 1977 and you want to retire when you are 65, your target retirement would be 2042. Knowing your target retirement date can help you calculate how much you should be putting aside each month for retirement.

READ MORE: How Much Should You Save Each Month for Retirement?

How Much Will You Spend in Retirement?

Do you plan to jet-set around the world or live a quiet life at home? Will your mortgage be paid off or will you be a renter for life? Do you plan to live in an expensive metropolis or is a frugal life in the country more your style? Your future cost of living will play a large role in how much to save for retirement.

Start by calculating how much you need to maintain your current standard of living. Experts have a few recommended guidelines for doing this:

• The 80% rule: Some experts will cite the "80 percent rule" of retirement planning, which states that you should plan to live on 80 percent of your pre-retirement income to maintain a similar lifestyle. So if you earn $100,000 per year, you should aim for a retirement income in the range of $80,000 per year. The reason is that once retired, you'll have fewer expenses: You likely won't be commuting, your student loans will be paid off, and your mortgage will (hopefully) be wiped out.
• The 25X spending rule: With the 25X spending rule, some experts recommend saving 25 times the amount you expect to withdraw from your investment portfolio each year. So if you plan to withdraw $60,000 annually, that means your portfolio should total $1,500,000 in retirement.

READ MORE: Top Places to Retire for 3K, 4K, 5K, 6K, or 10K per month

Furthermore, think about what kind of life you want to live in retirement. Your personal goals—retiring early, owning a second home, leaving a nest egg for your heirs or accommodating health challenges—could mean that your needs require different financial planning. For example, a retiree who plans to take multi-year luxury trips around the world may need more money saved than someone who owns plans to stay close to home.

The unpredictability of economic factors (such as inflation), medical costs and your longevity will also affect your expenses in retirement.

READ MORE: How to Retire Early With FIRE

Retirement Age Calculator

Still got questions? We developed a retirement age calculator so that you can quickly and easily calculate how much money to save each month to meet your retirement goals. Just input five pieces of information—your age, amount saved, expected annual return, expenses per month in retirement and target retirement age—and the calculator lets you know if you're on track. If you need to increase your monthly savings rate, it will give you an idea of much you should save.

Average Retirement Age

The average retirement age for men is 64.6 years, while it's 62.3 years for women, according to the Center for Retirement Research at Boston College. The average retirement age has increased by about three years since the 1990s but varies by socioeconomic group. Those with high school diplomas tend to retire earlier than those who have college degrees. 

However, you can't get full Social Security benefits until the retirement age for the year you were born, which is usually 66 years of age. And Medicare benefits don't kick in until the age of 65 unless you have a qualifying disability. 

Tips to Help Save For Retirement at Any Age

From your 20s to your 60s, planning for a comfortable retirement starts with looking at your income and expenses and finding ways to save more money. While tracking spending and managing finances can seem overwhelming, there are ample resources to make the task less stressful and can help set you up for retirement.

Saving for Retirement in Your 20s

Many Americans in their 20s begin their careers with entry-level paychecks. It may seem too early to think about retirement, especially if you're paying off student loans.

However, an effective way to start saving for retirement in your 20s is by contributing to a retirement account, like a company-provided 401(k).

Half of Millennials and Generation X expect most retirement income to come from a 401(k) while Baby Boomers could rely on Social Security, so this will be a key aspect of retirement if you're younger. Your employer may give a matching contribution up to a certain percentage. Take advantage of this offering, but don't stress—you have at least 40 years to build your retirement.

Besides contributing to your company's 401(k), experts also recommend starting an emergency fund. Putting aside money for surprise expenses, such as house and car repairs, protects your retirement savings from being your backup fund. Transamerica data says Millennials have the lowest median saved for emergencies at $2,000 (although it's expected to increase with age). Only one in three workers in all generations have emergency savings plans. It's also important to set up an emergency fund for unexpected expenses, such as car repairs or unexpected bills.

Having a decent emergency savings of three to six months of living expenses could help prevent you from needing to tap into money from your retirement savings. According to the IRS, withdrawing money from an IRA before age 59½ isn't ideal. The withdrawn amount is considered part of your gross income and has a penalty tax of 10%. This means it's better to have a pot of money designated for unforeseen circumstances.

This is also the best time to be an aggressive investor. In your 20s, you have time on your side and you can take a higher risk tolerance, as you generally have time to earn back any losses you incur. If investing is daunting to you, watch this video as an intro to basic investment terminology.

Tips for Saving for Retirement in your 20s
• Contribute as much as you can to your company's 401(k) plan
• Set up an emergency fund that covers 3-6 months of living expenses
• Start investing early to give your money more time to grow

Saving for Retirement in Your 30s

Buying a house and starting a family are common life events for Americans in their 30s. These milestones are not only expensive, but they distract from saving for retirement. And many Americans in their 30s are still paying off student loans.

On the other hand, people in their 30s are often more established in their careers and have higher paychecks than those in their 20s. So, how do you balance handling your current expenses and planning for the future?

First, tighten up your budget. It's tempting to just plan for your short-term expenses, but don't forget to make long-term goals like retirement a priority. You could also be saving for your kids' college. By paying close attention to where your cash is going now, you may not have to work as hard to meet your retirement savings goals down the road. Turn saving into a family affair and teach your kids good money habits.

Second, try to save up to 15% of your income to contribute to a retirement account(s). If you only just started saving for retirement in your 30s, you may want to consider contributing a higher percentage to catch up on contributions. If you aren't doing so already, take full advantage of your employer's 401(k) match. Subtract the 401(k) percentage that your company matches from 15%, and the result is what you should contribute on your own.

Again, you're young enough to take on a higher risk tolerance and rebound from any losses you may incur.

Tips for Saving for Retirement in your 30s
• Set up a strict budget especially if you're considering buying a house or starting a family
• Contribute at least 15% of your income to your retirement account
• Start saving for things like your child's college education

Saving for Retirement in Your 40s

While the recommended retirement plan savings amount is up to four times your annual salary, this is not realistic for many Americans in their 40s. The average income for those in their 40s is just above $50,000, but the median retirement savings amount for this age group is $63,000. Remember it's recommended to have about three times your annual salary saved by now, so see if your balance reflects that.

What steps can you take to meet this goal? Try putting any windfalls—such as unexpected money from a pay raise or inheritance—into retirement savings accounts. The average time to pay off student loans for a bachelor's degree is 19.7 years, so (hopefully) by now you've eliminated your education debt and can fully focus on retirement savings.

Even if you're behind in funding a comfortable retirement, there's still time to catch up. Make retirement a priority in your budget right after essentials needs, such as your mortgage, utilities, and food.

Tips for Saving for Retirement in your 40s

• Pay off the rest of your student loans and focus on your retirement savings
• If you get a pay raise or bonus, consider putting that aside into your retirement account
• Make your retirement savings a priority

Saving for Retirement in Your 50s

At age 50, retirement is closer than you think and it's time to get serious about saving if you haven't already. It might seem ambitious to save up to seven times your annual salary, but meeting this goal could set you up for success.

If your salary is $50,000 or higher, you should have at least $350,000 saved. If you're nowhere close to that, take a look at your budget and see what changes you can make to get on track. You can also talk to a financial advisor about making adjustments to your IRA. If you're 50 or older, you can contribute an extra $1,000 to your IRA and $6,500 to a 401(k) or 403(b) as a “catch up" for 2020 and 2021 limits. By 59½ you'll be able to withdraw from your IRA, but if you can afford to put that off, you'll benefit from a larger savings pool down the line.

Tips for Saving for Retirement in your 50s
• Continue to put aside money into your retirement savings
• Talk to a financial advisor about making adjustments to your IRA

Saving for Retirement in Your 60s

Now that the finish line is in sight, consider your goals and plans for retirement. Keep in mind that these savings help support your current lifestyle. They also cover medical costs during retirement— around $390,000. If you want to purchase a beach house or travel the world, your retirement savings need to reflect that.

Put the finishing touches on your savings plan or make any necessary changes. If you're still far from the savings benchmark of 8-10 times your annual salary, think about what assets you can monetize. You may also consider working for a few more years. This not only provides more income but decreases the time you'll need to use your retirement savings.

During your 60s, you'll also be eligible for Social Security benefits. Social Security could be a significant supplement if you find your savings are lacking. But again, if you afford to do so you should delay claiming benefits until 70 when the benefit increases stop.

Tips for Saving for Retirement in your 60s
• Review your retirement savings goals and make sure they reflect your current lifestyle
• Consider working a few extra years if needed
• Think about monetizing any assets

Why You Shouldn't Rely on Social Security

While many Americans rely on Social Security benefits during retirement, it's not designed to be your only source of income when you retire. The average retired worker gets $1,658 a month as of January 2022, which is just above minimum wage. 

If you have a lot of debt that you can't pay off before you retire, or you want to travel, social security won't be enough. That's why it's important to set up a retirement account and not just depend on Social Security benefits. Another thing to note is that the amount of money you save in a 401(k) or IRA won't impact your social security benefits. 

IRAs and Your Retirement Savings 

To meet the recommended retirement savings by age, you may want to consider opening or contributing to an IRA (Individual Retirement Account). This type of retirement plan has tax advantages and allows you to set aside funds in a separate place from your regular savings or emergency funds. The two main types of IRAs are traditional and Roth IRAs:

• Traditional IRA: Contributions to traditional IRAs may be tax-deductible. Note that you may be penalized and taxed if you withdraw from a traditional IRA before age 59½. As of 2020, The Secure Act has removed the age cap for traditional IRA contributions, which will allow older workers to put away some of their earned income.

•  Roth IRA: People choose to open Roth IRAs because contributions are made post-tax and can be made at any age. You may withdraw earnings without taxes or penalties if the funds have been in the Roth IRA for at least 5 years and you are at least age 59½.

For the years 2021 and 2022, your IRA contributions can't exceed $6,000 (under age 50), $7,000 (over age 50) or your taxable compensation for the year, if your compensation is less than this limit.

For example, let's say you are age 54 and make $58,000 a year. You can contribute up to $7,000 in the year 2022. If you are age 29 and make $4,000 at a part-time job, you can contribute up to $4,000.

Where Can I Open an IRA?

It's never too soon to start saving for retirement. You can open your own traditional or Roth IRA as soon as you are no longer a minor (usually age 18). Some parents or guardians choose to open an IRA for their child before this age. This is usually to kickstart savings and establish healthy financial habits at an early age. The IRA is opened in the child's name, and the child can make contributions as long as they have some source of income.

Synchrony Bank does not provide financial advice, so be sure to consult your tax or financial advisor before opening or contributing to an IRA.

The Bottom Line: Get Busy Building Your Nest Egg!

No matter your age or stage, contributing to your employer's 401(k) plan or an IRA can turn your savings into a reliable source of retirement income. Many retirement savings plans also reduce your taxable income, so you'll keep more of what you earn today.

Moriah Costa - Moriah Costa is a personal finance and investing writer. Her work has appeared on Thomson Reuters, S&P Global, The Washington Business Journal, and others.

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