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How much money should I have saved by 40?

Even with retirement nearing, you still have time to benefit from the power of compounding.

You’re 25 years away from retirement if you plan to start your golden years at age 65, so you’re probably wondering if you have enough to retire comfortably. You may be paying off a mortgage and saving for a kid’s college education. Saving at age 40 can be challenging, considering the different financial priorities you may have, but any money you have saved and continue to save can benefit from compound interest and investment earnings.

How much money should I have in savings at 40?

The average retirement savings for someone in the gen Y population is $91,191, according to Finder’s Consumer Confidence Index. As of 2023, the age range for millennials — gen Y — is between 27 and 42, putting a 40-year-old near the tail end of this population. Finder data shows that millennials, on average, contribute $9,498 each year toward retirement.

Is that enough? It depends on when you want to retire and how much your money can grow over time.

For instance, if you had retirement savings of $91,191 by age 40 and earned the stock market’s average historical return of 10% each year for the next 25 years while making no further contributions, your money could grow to just shy of the $1 million mark by age 65 with compounding alone.

This is a hypothetical, of course. The 10% stock market return is a historical average. Some years will be higher, while others will be lower. And making additional contributions will help you build your savings faster.

But since everyone’s financial situation is different, let’s look at some ways you can boost your savings if you feel you’re behind.

How to save money in your 40s

Saving money in your 40s can be a challenge considering retirement savings is more important than it was when you were in your 20s, but you also may have other obligations to meet like raising a family and saving for a child’s college education.

Here are some steps you can take to elevate your retirement savings.

Contribute enough to get your 401(k) match

In 2024, you can contribute a maximum of $23,000 to your 401(k)(1). But depending on your yearly income, maxing out your 401(k) may not be feasible. That’s OK. But you should contribute at least enough to get any available company match. This is perhaps the closest thing to “free money” you’ll ever see.
Matching formulas vary by company. For example, your company may match your annual contributions dollar-for-dollar until you’ve contributed 3% of your salary. So, if you’re making $60,000, consider contributing at least $1,800 a year to get $1,800 in matching funds.

Max out your IRA

The median weekly earnings for someone between the ages of 35 to 44 is $1,263 or $65,676 a year ($1,263 X 52 approximate weeks in a year). (2) Taking the common advice of saving at least 15% of your income each year for retirement, the average 40-year-old should save $9,851 a year. At this amount, you’re saving more than enough to max out your IRA.

The maximum contribution to all your IRAs and Roth IRAs for 2024 is $7,000. IRAs let you invest in virtually any security, and their tax benefits are incredibly valuable. Your traditional IRA contributions may be tax-deductible, while Roth IRA withdrawals are tax-free in retirement.

For an extra boost to your savings, consider opening an IRA or Roth IRA through an online broker that offers an IRA matching program. For instance, Robinhood will match up to 3% of your IRA contributions when you subscribe to Robinhood Gold, or 1% without. So, if you contribute the maximum $7,000 in 2024, that’s an extra $210. While this may not seem like a lot at first glance, it’ll help transform your savings over time.

Our top picks for IRA accounts

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Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.

Finder is not an adviser or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.

Use an HSA as a retirement savings tool

If you have a high-deductible health plan, you could pair it with a health savings account (HSA). An HSA lets you receive tax benefits while saving for qualified health expenses. The money you put in an HSA is tax-deductible, so it may reduce your tax bill or increase your refund. Money also grows in an HSA tax-free, and withdrawals are tax-free as long as you use them on qualified health expenses.

At age 65, you can withdraw money from an HSA for any reason without penalty. However, you’d still owe income tax on the withdrawals.

Switch to a high-yield savings account

The average interest rate on traditional savings accounts is 0.46% APY, according to the Federal Deposit Insurance Corporation (FDIC). However, some of the most competitive high-yield savings accounts pay around 5% APY as of January 2024.

For any cash savings you may need immediate access to, such as an emergency fund or savings for any other short-term goals, a high-yield savings account can help grow your money in a way that’s not possible with a traditional, brick-and-mortar bank.

Check the following table to see how $10,000 with no additional contributions could transform over time in these different savings accounts. Many high-yield savings accounts credit interest daily, which lets your money grow faster. Compare that to a monthly compounding frequency for many traditional savings accounts.

Balance after 1 yearBalance after 2 yearsBalance after 3 years
Traditional savings account at 0.46% APY$10,046.10$10,092.41$10,138.93
High-yield savings account at 5% APY$10,511.62$11,049.41$11,614.72

Pay off high-interest debt

The average credit card debt for millennials is $4,974, according to our research. And credit card debt is among the most costly debt you can have. The average interest rate on a credit card is 21.19%, according to the Federal Reserve Bank of St. Louis.

If you’re paying more in interest on your debt than you’re earning on your investments, you’re technically losing money. One way to boost your savings is to shed any costly debt. You’ll save on interest, and it’ll free up more money for you to contribute toward savings.

Bottom line

The average retirement savings for someone in the gen Y population is $91,191, according to Finder data. But how much money you personally should have saved by 40 depends on your retirement age and goals. Once you come up with a target retirement amount, see if you’re on track and consider the different ways to increase your savings so you can meet your goals on time.

1 - 6 of 6
Name Product Minimum deposit Annual fee Retirement account types
SoFi IRA
Finder Score: 4.2 / 5: ★★★★★
SoFi IRA
$0
$0 per month
Roth, Traditional, SEP, Rollover
Trade stocks, options, ETFs, mutual funds and alternative asset funds, with no-cost financial advice and a no-cost robo-advisor.
JP Morgan Personal Advisors
Finder Score: 3.3 / 5: ★★★★★
JP Morgan Personal Advisors
$25,000
0.6% on balances of $25,000 to $249,999

0.5% on balances of $250,000 to $1,000,000

0.4% on balances of $1,000,000+
Roth, Traditional
Ongoing access to an advisory team with personalized, expert-built portfolios. Provider terms & conditions apply
Robinhood Retirement
Finder Score: 4.4 / 5: ★★★★★
Robinhood Retirement
$0
0%
Roth, Traditional, Rollover
Boost your retirement savings with 1% in matching funds on every dollar contributed, transferred or rolled over to a Robinhood IRA.
Vanguard IRA
Finder Score: 4 / 5: ★★★★★
Vanguard IRA
$0
0.3%
Roth, Traditional, SEP, Spousal, Rollover
Save for retirement with Vanguard's commission-free stocks, ETFs and 160+ no-transaction-fee mutual funds.
Interactive Brokers IRA
Finder Score: 4.5 / 5: ★★★★★
Interactive Brokers IRA
$0
N/A
Roth, Traditional, SEP, Rollover
Choose from 6 IRA account options, with access to stocks, ETFs , futures, currencies and more.
Acorns Later
Finder Score: 4.2 / 5: ★★★★★
Acorns Later
$0
$3 per month
Roth, Traditional, SEP
Automatic ETF investing with as little as $5. Annual fee of $3, $5 or $9 per month depending on subscription.
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Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.

Finder is not an adviser or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.

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