How Much Should I Have Saved in My 40s?

Couple in their 40s reviewing their savings plan together.

Craig Lemoine, Ph.D., CFP®, Director of Consumer Investment Research 


Welcome to your 40s. You’ve built some wealth, and likely had a career or two by now. Earnings, responsibility and possibly children have grown around you. And as you think about retirement and long-term goals, they feel more tangible than they did twenty years ago. With higher income comes more opportunity to save – but hobbies and other distractions may waylay your success. Lastly, your 40s are a time to focus on your health.  

Consider the following five steps to take planning for retirement in your 40s:   

 1. Align Your Current Spending and Savings Plans with Future Goals

Take a deep dive from top to bottom. In your 40s, the tradeoff between today and tomorrow becomes very tangible. Every dollar you put in savings has twenty years to compound — and every dollar you borrow will need to be paid back.  

Create an in-depth cash flow statement to get a better idea of your lifestyle. A cash flow statement should show dollars in and dollars out of your personal financial cash flow. Consider tracking your actual expenses for a few months to get a concrete handle of how you live today. Income should include income from your job, interest from a bank, dividends from stocks, coupons from bonds and any gifts or other sources of cash flow.  

When tracking expenses consider two categories: fixed and discretionary. Fixed expenses are those you are contractually required to make as well as costs for basic needs such as where you live, what you eat and how you get around. Examples of fixed expenses include any rent or mortgage payments, insurance premiums, groceries, heating and electric bills.  

Discretionary expenses include money spent traveling, eating out, contributing to savings and retirement plans or occasional purchases and upgrades. Line item through the cash flow statement and cut items that are not in line with your vision of the future to find extra cash for savings.   

2. Maximize Your Retirement Plan Savings

If you’ve been saving in your employer retirement plan or IRAs, you’ve likely noticed those balances begin to meaningfully accumulate. If you are late to the party, fear not! You still have twenty years to build some wealth. Retirement plans, such as 401(k) and 403(b) plans, allow employees to contribute a portion of their salary up to a federal limit ($20,500 in 2022). Qualified employer retirement plans allow tax-deferred growth, which means accounts are not subject to taxes on dividends or capital gains until proceeds are distributed at a later date. Employers often match a portion of this contribution to a retirement plan as an employer benefit. One guiding principle for this decade: clients should aim to have between three and five times their annual income saved by their mid-40s, and six to 10 times by the end of their 40s. 

Consider this example:  

Ellie (42) is an executive at RetireRisks Inc.. Her annual salary is $250,000. Ellie’s employer will match any 401(k) retirement contributions up to 4% of her salary. Ellie decides to contribute $20,500 into this plan.. Ellie’s employer will match this contribution by $10,000 (or 4% of her salary). By Ellie saving $20,500 into the plan she reduces her federal taxable income to $239,500, meaning she will have a lower annual tax liability. Additionally her employer will put $10,000 in her account annually as a match.  

Compounding interest can be power for Ellie. Assume Ellie continues to put $20,500 in her plan annually and her employer match this contribution with $10,000 per year. If Ellie earned a net 7% rate of return annually her account could grow to around $421,000 after ten years and over $1.2 million after twenty years. Combined with other existing assets Ellie is on her way to a successful retirement.  

 3. Focus on Your Health and Wellness

Being healthier in your 40s paves the way to healthier lifestyles through retirement. John’s Hopkins Medicine suggests being active more often, improving your diet, getting quality sleep, stopping smoking and challenging your brain leads to happier and healthier aging. Focusing on your health at forty can help you thrive later in life.  

 4. Align Your Portfolio with Your Risk Tolerance, Goals and Values

Consider working with an investment adviser or qualified Certified Financial Planner™ professional to design an investment plan that aligns your goal, risk and values. As you build wealth, managing it in line with your values will not only help you prepare for retirement but also contribute to the world in ways that matter most to you. Work together to determine how much to save towards your goals, what types of accounts to save in and strategies that will best help you succeed.   

 5. Begin Thinking in Terms of Significance and Impact

As you build wealth and security, consider the tradeoff of your years left in the workplace. Once you’ve established a path towards financial independence you earn the freedom to build a career in directions of personal value. What does success mean to you? Do you have the time to mentor and give back to the next generation of your profession? Do you have the capacity to give back to the world around you? In your 40’s you will likely have more options than in your 20s. Consider those options as you hit the peak of your career.   

Talk to a Professional 

Meeting with a qualified financial planner is critical in your 40s. This is a time with more demands and resources than ever. Even if you are behind on savings, hope is not lost! Your 40s are a time where you can set a plan to cross the threshold of financial independence and find financial security. They are a time to begin working on or reclaim your physical and financial health. Meeting with a qualified financial planner can help you build the road you need for the future.   


The example above uses a 7% return, which is similar to a historical portfolio consisting of equities and bond positions. All investing requires risks, past returns are not indicative of future performance. This rate is not guaranteed and is used to illustrate compounding interest.  

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. 

Craig Lemoine is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig Lemoine is in no way related to Cetera Advisor Networks LLC or its registered representatives.  


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