What is a Good Retirement Savings Balance by Age 40?

Turning 40 is a major financial milestone. You are likely in your prime earning years, but retirement is still a solid 20 to 25 years away. It's the perfect time to do a "mid-game" checkup on your retirement accounts.

So, how much should you actually have saved by the time you blow out 40 candles?

The "3x Your Salary" Rule

While everyone's financial situation is different, major financial institutions like Fidelity Investments have created widely accepted benchmarks.

The standard rule of thumb is: By age 40, you should have three times (3x) your annual salary saved for retirement.

What that looks like in reality:

• If you make $50,000 a year, you should have $150,000 invested.
• If you make $75,000 a year, you should have $225,000 invested.
• If you make $100,000 a year, you should have $300,000 invested.

These savings should be in dedicated retirement accounts like a 401(k), IRA, or Roth IRA, not sitting in a standard checking account.

Why is it Based on Salary?

You might wonder why the benchmark isn't a flat number, like "$200,000 for everyone."

It's based on salary because your current income is the best predictor of your future lifestyle expenses. If you earn $100,000 a year, your cost of living (mortgage, cars, travel) is likely much higher than someone earning $50,000. Therefore, you will need a much larger nest egg to maintain that same lifestyle when you stop working.

What if You Are Behind?

If you are 40 and nowhere near the 3x multiplier, do not panic. You still have two decades for compound interest to do its magic.

1. Increase your 401(k) match: Ensure you are getting 100% of the free money your employer offers.
2. Automate increases: Bump up your contribution rate by 1% every six months. You won't even notice it on your paycheck.

To see exactly how much your current savings will grow by age 65, plug your numbers into our free Retirement Calculator. It will tell you exactly what you need to do today to retire comfortably tomorrow!