Here's how much money you should have saved for retirement by age 40 (2024)

Saving for retirement is a big deal. Most people don't want to work through their later years, so setting money aside is important. Unfortunately, some people don't start to think about retirement until they reach middle age. While it certainly isn't too late to start saving if you're 40 and haven't started planning for your retirement, things will be a lot easier for you if you start planning much earlier — as soon as you entire the workforce, in fact.

Exactly how much money you need for retirement depends on your lifestyle, location and other factors, but here's a basic look at much you should have saved for retirement by the time you turn 40.

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How much money should you have saved for retirement by age 40?

Generally speaking, most financial professionals will tell you that by age 40 you should have at least three times your annual salary saved. Keep in mind that for married couples you should have three times your combined household income. If your home brings in $125,000 per year, this rule would dictate that you need at least $375,000 in retirement savings when you blow out the candles on your 40th.

Of course, this isn't a hard and fast rule. You may have specific retirement goals that dictate you need more or less. For instance, if you live in a big city like New York or Chicago, your cost of living is likely high, and that should be reflected in your earnings. But if you're planning to move to somewhere with a significantly lower cost of living after retirement, you may need less money in retirement than you would otherwise.

On the other hand, you might want to travel around the world or perhaps even movesomeplace exciting and expensive after you retire. If that's the case, you'll probably need more than others — which means you'll want more than three times your salary saved by the time you reach 40.

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Tips for reaching your retirement savings goal

Once you know approximately how much money you should have saved, there are many methods you can use to save this money. Here are some of the best options:

Use a tax-advantaged savings account

The simplest way to save money for retirement is to use a tax-advantaged savings account such as a 401(k) or an individual retirement account. With both of these options, you put money into the account before it is taxed and you can invest it in various options. The money grows over time, and eventually, you take dispersals in retirement. A workplace plan like a 401(k) can be especially useful if your company offers an employer match program.

High-yield savings account

While a tax-advantaged account is great, you may want some of your money to be easier to access. A high-yield savings account is a great way to do this and still earn interest. High-yield savings accounts offer much higher rates than traditional savings accounts, so make sure you spend the time to find the best rate possible.

Certificates of deposit

A certificate of deposit (CD) is a savings product where you put money into the bank for a predetermined amount of time and earn a fixed interest rate, usually higher than savings accounts. This is a strong option for savers because you get a decent return on your money, but without the risks of other choices like stock investing.

The bottom line

By the time you turn 40, most experts say you should have at least three times your annual salary saved for retirement. That's just a guideline, though. Depending on your plans for retirement, you may need more or less. Whatever your savings goal, there are a number of strategies you can use to get there, including tax-advantaged accounts, savings accounts and CDs.