Is Your Retirement At Risk?

Is this Happening to You? You’re Thinking: “I am 40 and I have no saving. Is it too late change my life and to start saving for retirement? How much money have I saved for retirement?

How Do Your Retirement Savings Stack Up Against Your Peers?

Based on Fidelity’s savings factor system, a 40-year-old should try to have $150,000 – or approximately 3x his or her annual salary – already saved for retirement.

However, if a 40-year-old has less than $150,000 in retirement savings available, this individual may need to play catch-up to ensure he or she is prepared financially for retirement.

How much money should I have saved by age 40?

Based on Fidelity’s savings factor system, a 40-year-old should try to have $150,000 – or approximately 3x his or her annual salary – already saved for retirement. However, if a 40-year-old has less than $150,000 in retirement savings available, this individual may need to play catch-up to ensure he or she is prepared financially for retirement.

You’re Age 35, 50, or 60: How Much Should You Have Saved for Retirement by Now?

If you want to track your progress toward a goal, chances are there is an app that can do that for you. For example, you can track your steps, your packages, your diet, and even your family’s whereabouts.

But when it comes to saving for your retirement, how much time do you spend tracking your progress? And at what point in your life should you start paying attention?

Retirement planning can be intimidating at any age—even more so early in your career. When retirement seems so far in the future, it’s hard to plan for it with so many competing priorities in the present. For example, in addition to your regular bills, you may have student loans to repay. Or you may be trying to save money to purchase a home or save for your kids’ college education.

Still, it’s important to make steady progress toward saving, no matter what your age. Moreover, taking stock of where you stand can help you plan with more intention based on your situation.

How much money should a 25 year old save for retirement?

Saving 15% of income per year (including any employer contributions) is an appropriate savings level for many people. Having one to one-and-a-half times your income saved for retirement by age 35 is an attainable target for someone who starts saving at age 25.

How much money should you have saved by age 50?

How much should you have saved by age 50? Generally, you should aim to have 6 times your annual salary when you come into your 50s, and up to 8 times by your 60th birthday. Keep in mind that this is a ballpark figure and assume that you are retiring at age 65.

How much retirement savings should you have by 60?

We recommend that by the age of 60, you have about eight times your current salary saved for retirement. So, if you earn $75,000 a year, you will have between $525,000 to $600,000 in retirement savings by 60. How do you know if this is the right amount for you? Think of it as a general guideline.

Average Retirement Savings Balance by Age

Perhaps the most official measure of American retirement savings comes from the Federal Reserve System. The Fed calculated average retirement account balances for individuals in 2019, the latest year for which figures are available. Broken down by age, those balances are as follows:

AGE	AVERAGE RETIREMENT ACCOUNT BALANCE
35-44	$131,950
45-54	$254,720
55-64	$408,420
65-74	$426,070

QUESTION: Will an additional 30k to 75k help you retire financially prosperously? Are you willing to be paid for what you are already doing but not being paid for?

No retirement savings? Here’s a comprehensive guide to help you retire wealthy.

If you’re starting to save for retirement at 40, that’s not ideal, but it’s also far from being too late.

While the standard advice is to begin stashing away money for retirement in your early 20s, that’s not what most people do, as it turns out.

According to an annual report published by investment management company Vanguard, the median balance Americans aged 35 to 44 had saved in Vanguard retirement plans was $28,318 in 2022.

That means if you have no retirement savings at 40, or perhaps haven’t made a concerted effort to start saving, you’re really not that far behind your peers.

Is it too late to save for retirement at 40?

If you’re wondering how to save for retirement in your 40s, avoid making the mistake of thinking you’ll never retire and you’ll just keep working until your last day on earth.

That’s an unlikely scenario.

Instead, start planning and taking proactive measures.

While it may not seem like you have a long time until you hit retirement, it’s still crucial to maximize your contributions to an employer-sponsored retirement plan, such as a 401(k) or 403(b), as soon as possible.

“At 40, you still have about 20 to 25 years until retirement, which is a considerable amount of time to grow your investments,” says Taylor Kovar, CEO at Kovar Wealth Management in Lufkin, Texas.

“Your investment mix should be a balance between growth-oriented investments and some conservative options to protect against market downturns,” he says. “A significant portion of your portfolio should be in stocks or stock mutual funds.”

Kovar suggests considering index funds or exchange-traded funds (ETFs), two types of pooled investment vehicles, for broad market exposure with lower fees.

“Be honest about your risk tolerance,” he says. “At 40, you might not have the same risk capacity as someone in their 20s, but you still need some growth to ensure your savings last.”

Also, catch-up contributions are a great idea for investors over age 50. The idea behind catch-up contributions is exactly what the name suggests: You can juice up your retirement savings even if you got a late start.

While your time horizon is shorter if you start investing after 40, you can jump-start your retirement investing by using disciplined budgeting, minimizing debt and maximizing the amount you salt away regularly.

Understanding the need for retirement savings at 40

At 40, you’re approaching the midpoint of your working life, which is a wake-up call that it’s time to start prioritizing your financial future.

If you’re currently 40, your full Social Security retirement age is 67, so you have plenty of time left in the workforce.

But financial responsibilities for many people peak in their 40s and 50s, as children’s college expenses take precedence over other saving and spending categories. That means you may want to consider less expensive vacations for a while, and maybe keep that car an extra few years.

Cutting back on lifestyle doesn’t sound great, but there’s a way to look at the bright side: Starting your retirement savings at 40 allows you to take more risk with stocks than you would if you started a decade later. Your future self will thank you for starting now, instead of waiting another 10 years.

How to kickstart your retirement savings at 40

Kickstarting portfolio growth at 40 requires a very focused approach.

Many financial advisors suggest a more aggressive allocation for those with a longer time horizon and higher risk tolerance. Some might even recommend an 80/20 stock/bond split, or even a stock-heavy 90/10 allocation, at age 40.

But if you’re nervous about market ups and downs and find that you don’t sleep well if, for example, your portfolio is showing a big drop during a bear market, you may want a more conservative allocation.

Whatever the mix, it’s important to diversify using asset classes like stocks, fixed-income securities and alternatives, such as real estate or even commodities.

Another tried-and-true plan is to use tax-advantaged retirement accounts, such as 401(k)s or individual retirement accounts (IRAs) to maximize your contributions.

How much should you save?

If you’re starting at 40, you’re playing a bit of catch-up versus the person who began saving for retirement at 30. That means you’ll have to put away more than you might want to, given the commonly accepted advice that you should try to accumulate and set aside at least three times your annual salary in retirement savings by age 40.

But remember, you’re likely not as far behind as you might think. According to Vanguard’s “How America Saves 2023” report, only 16% of retirement plan participants aged 35 to 44 contributed the maximum allowed amount in 2022.

Late starters can begin to catch up by maximizing contributions to tax-advantaged retirement accounts and being diligent about saving.

Maximizing 401(k)s and IRAs to save for retirement.

If you’re saving for retirement at 40, maximizing retirement savings through 401(k)s and IRAs is a critical step.

Michael Nemes, financial advisor at Nemes Rush Family Wealth Management in Novi, Michigan, says paying attention to your tax bracket is crucial.

“If you’re in your 40s, your income is hopefully going to be increasing in the future as you move towards retirement,” he says.

That means your tax bracket may be lower now than it will be in the future.

“Take advantage of the lower tax bracket now by utilizing the Roth feature of your 401(k), if your plan offers one,” he says.

The Roth feature, which is offered as part of most retirement plans these days, means that you pay tax on the contributions now, so your investment earnings and any qualified distributions are tax-free, he adds.

Contribute the maximum you’re allowed to your employer-sponsored 401(k), taking advantage of an employer match, if it’s offered. The employer match is essentially free money, so it’s a good idea to take your employer up on that benefit.

If you work at a non-profit or government agency, you may have a similar qualified retirement plan, such as a 403(b) or 457(b).

If you’ve maxed out your employer-sponsored plan, you can save extra money with an IRA, which also allows for tax-advantaged savings.

After you turn 50, you can maximize those qualified accounts with catch-up contributions.

Don’t forget to regularly review and adjust your investment allocations. One big mistake many investors make is just setting and forgetting their 401(k)s, resulting in declines as some funds outperform others. It’s a good idea to review your holdings at least once a year.

FREE MKS Master Key System Financial Coaching Advisors and Retirement Planning

At any age, it can help to have a roadmap for a comfortable retirement. A financial planner can bring a fresh perspective to your situation, along with personalized strategies as you begin thinking about retirement.

If you’re in your 40s, a planner can help you figure out how much you need to save if you want to retire at 67, 70 or some other age. A planner can also help you consider various scenarios, even including semi-retirement or other options.

He or she will typically run a comprehensive analysis of your financial situation, including not just retirement savings and your portfolio allocations but also college savings, tax strategies, insurance and your mortgage payoff rate.

Although you probably don’t have your retirement vision completely fleshed out at 40, because almost no one does, working with a financial planner can be a great start as you work toward your eventual goals.

Free Insurance and Retirement Planning Coaching

At 40, integrating insurance into your retirement planning and financial planning is crucial. Life insurance is crucial to protect your family in the event of your untimely death.

It’s not just the family’s chief breadwinner who needs to be insured. Stay-at-home parents would also be wise to consider life insurance. In the event of an early death, life insurance helps cover child care and ongoing household expenses and can help maintain stability at a difficult time.

While you may not need life insurance in the future, after you are no longer working and no longer have children living at home, it’s necessary for many people throughout their working years.

Tailoring insurance coverage to your situation is a way of bolstering your retirement savings with a safety net.

Be sure to regularly review and update policies as your life circumstances change.

FREE Retirement Lifestyle Planning Coaching

We humans are pretty bad at thinking about our future selves, but that’s exactly what we have to do when planning for our future lifestyles in retirement. So go ahead and put on that futuristic thinking cap. If you establish financial goals and invest wisely, you can set yourself up for flexibility and a more enjoyable lifestyle down the road.

While your specific retirement dreams will almost certainly evolve over time, early planning can help ensure financial security, giving you more freedom to explore new interests or unexpected opportunities.

Health care considerations for retirement

It’s good practice to anticipate rising medical costs by factoring in health insurance premiums, co-pays and potential long-term care expenses.

As you get older, you’ll have to evaluate Medicare options and supplement plans to understand coverage gaps. At 40, nobody is thinking about Medicare, but many retirees find it’s a good insurance program, even if they choose to supplement it with private insurance.

Throughout your life, maintaining a healthy lifestyle to mitigate the effects of health issues can dramatically reduce medical costs over the long haul. That can make your retirement years not only less expensive but also more enjoyable.

Frequently asked questions (FAQs)

[1]: What is the minimum amount I should start saving for retirement at 40?

Investment management company Fidelity Investments recommends saving “at least 15% of your pre-tax income each year, which includes any employer match.” But this figure assumes “you save for retirement from age 25 to age 67.”

So, if you don’t start saving until age 40, you may need to save a higher percentage of your income. This can help you accumulate a nice pile of money by the time you retire. It also takes into account those inevitable market swings over the next few decades, while allowing you to benefit from the power of compounding.

[2]: Is it possible to retire comfortably even if I start saving at 40?

Yes, it’s very possible to retire comfortably even if you start saving at 40.

Regular contributions to your retirement accounts will go a long way toward making that dream a reality. Take advantage of catch-up contributions after the age of 50. Adjusting your lifestyle, managing your debt and seeking professional advice from a planner may also increase the likelihood of a comfortable retirement despite a relatively late start.

“If you are 40 and just starting to save, you should also start adjusting your expectations around your retirement date,” says Anne Lester, author of “Your Best Financial Life.”

“Planning to work until you are 70 and to claim Social Security at that age is one of the most powerful things you can do to boost your retirement success,” she adds.

That strategy offers benefits, including a higher monthly check, more years to save for retirement and a nest egg that doesn’t need to generate income for as many years, as you’re delaying retirement.

[3]: Can I rely solely on Social Security for my retirement?

Relying solely on Social Security for retirement is risky, as it’s highly unlikely to cover even your basic life expenses, never mind extras, such as travel or just having some fun!

For a better chance at achieving financial security, supplement Social Security with personal savings and investments.

[4]: What are some mistakes to avoid when starting retirement savings late?

If you’re beginning the process of saving for retirement in your 40s, you’re likely in your peak earning years but also have less wiggle room to make mistakes.

Steer clear of high-risk investments, particularly those that are illiquid and difficult to sell, such as non-publicly-traded real estate investment trusts (REITs).

You’ll probably have to adjust your lifestyle to make more money available for saving. Nobody enjoys that part, but sticking to a budget is a proven way to help manage your expenses.

A common mistake is underestimating how much you’ll need in your retirement years. People often believe their spending will decrease in retirement, but that’s not always what happens.

Running out of money in retirement is a very real risk, and it’s not pleasant to think about, but you can avoid that through deliberate planning and saving.

[5]: How does inflation impact my retirement savings?

Inflation erodes your purchasing power, reducing the value of your retirement savings.

Whether you’re already on retirement or still earning big money, in debt or just want more prosperity, abundance or money-making potential let us help you for FREE.

Live Long and Prosperously

Sydney Reitenbach and Michael Kissiner

Text: 650-515-7545

Emil: mjkkissinger@yahoo.com

Review: mksmasterkeycoaching.com

PS. We’ve all seen it lately as inflation rose significantly for the first time in years starting in 2021. As prices increase, so will your cost of living. That usually means you’ll need a larger nest egg to maintain your current lifestyle. An allocation into stocks has historically been a reliable way to protect against inflation.

Review: Live In The End – Whatever You Asked, Believe You Have It: https://www.youtube.com/watch?v=lXPr3FgQBxc&t=2s

Review: Millionaire Game-Plan – Become Self-Made Millionaire: https://www.youtube.com/watch?v=_psnFAHCYq0

Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines, hotel chain, or other commercial entity and have not been reviewed, approved or otherwise endorsed by any of such entities.

This content is for educational purposes only and is not intended and should not be understood to constitute financial, investment, insurance or legal advice. All individuals are encouraged to seek advice from a qualified financial professional before making any financial, insurance or investment decisions.

Note: While the offers mentioned above are accurate at the time of publication, they’re subject to change at any time and may have changed or may no longer be available.