Here’s How Much You Should Save for Retirement by 40

The fortieth birthday is a major life milestone, but it’s also a time to get serious about your retirement savings. According to Fidelity Investments, you should aim to have about three years’ salary saved for retirement by the time you hit 40.

In other words, if you make $50,000 a year, you should aim to have $150,000 saved up. If your annual income is $80,000, your goal should be $240,000.

With these numbers, you can expect to replace 45% of your pre-retirement income. The rest of your retirement income is expected to come from Social Security.

Fidelity’s estimate assumes that people will wait until age 67 (full retirement age for those born 1960 or later) to start collecting Social Security benefits and that people will maintain the same standard of living in retirement.The estimate also assumes that people invest in a target-date fund, which is a type of mutual fund that shifts portfolio allocation towards more conservative investments as a person approaches retirement.

If you’re wondering how to save up three years’ income, Fidelity offers these useful tips:

The ultimate retirement savings goal is to save ten years’ income by age 67, according to Fidelity.

Retirement Savings Tips for Your Forties

“Aim to save at least 15% of your gross income in your thirties, which includes any employer match. In your forties, increase this to 20% or more if possible,” saidChristopher Stroup, a certified financial planner (CFP) and founder of Silicon Beach Financial. “As income rises and expenses stabilize, allocating more to retirement can help you stay on track, especially if you’re playing catch-up from earlier years.”

Your forties can be a time for big expenses, such as paying for a child’s college tuition. Don’t offer to pay more than you can handle, and remember to put your own needs first.

“Prioritize retirement over funding college fully,” Stroup advises. “You can borrow for school, but not for retirement.”

Most people see their income peak in their forties, so they have more money to save. If you’re behind on your savings, this is also a chance to re-examine your budget.

“Look at the cash coming in and the essential expenses. Then, you have to balance your short-term ‘wants’ with your long-term goals,” says Chris Musick, a certified financial planner at Purpose Financial Planning.

Musick also recommends setting up automatic savings contributions and directing any raises and bonuses towards retirement. You should also contribute as much as possible to retirement accounts.

“Do your best to max out tax-advantaged accounts like 401(k)s and IRAs, reduce unnecessary expenses, and consider working with a fiduciary financial planner to model different catch-up strategies,” Stroup advises.

You can also consider changing your lifestyle to reduce your expenses and free up more income to save.

“Consider major life decisions such as moving to a lower cost-of-living area, downgrading your lifestyle, and making choices about your spending,” said Alex Caswell, a CFP and founder of Wealth Script Advisors. “What makes you actually happy? And what is frivolous spending?”

The Bottom Line

You should aim to save about three years’ income for retirement by the time you hit 40. Try to save around 15% of your income in your thirties, and increase that to 20% in your forties.

Most people have higher incomes as they get older, which means more money that can potentially be put aside for retirement. Maximize contributions to retirement accounts, and try to set aside any bonuses or raises as well. And remember to put your needs above those of other family members, including any college-bound children. While they can borrow for college, you can’t borrow for retirement.