What Should You Have Saved by 40? A Reality Check on Your 401(k) Strategy

According to recent research, Americans are far behind where financial experts believe they should be when it comes to retirement savings. For those in their 40s specifically, the question “how much should I have saved by 40” has become increasingly urgent as people approach the midpoint of their earning years. A comprehensive survey of over 1,000 working Americans conducted in late 2024 provides sobering insights into the gap between retirement readiness and reality for midcareer professionals.

The 401(k) Reality for Your 40s: What Americans Actually Have

For Americans in their 40s, the data reveals a mixed picture. Older millennials (ages 35 to 43) show a fairly dispersed distribution of 401(k) balances. Roughly 19% have accumulated less than $25,000, 21% fall between $25,001 and $50,000, 28% have between $50,001 and $100,000, and 18% hold between $100,001 and $500,000. Only about 5% have managed to build 401(k) balances exceeding $500,001.

The picture becomes slightly more stable when looking at Gen X (ages 45 to 54), who might be expected to have more substantial savings given their additional years in the workforce. However, their distribution is remarkably similar: 17% have less than $25,000, 22% have between $25,001 and $50,000, 28% hold between $50,001 and $100,000, 21% have between $100,001 and $500,000, and 5% exceed $500,001. Notably, 10% of older millennials don’t have a 401(k) at all, suggesting that gaps in retirement planning often begin well before the 40s.

The concerning reality is that even as people approach their peak earning years, many still hold relatively modest 401(k) balances. More than half of this age group—those who should theoretically have the most time remaining to accumulate wealth—have $100,000 or less saved.

Expert Guidelines: How Much You Should Have Saved by 40

Financial professionals have developed specific benchmarks to gauge whether you’re on track. According to Steve Sexton, CEO of Sexton Advisory Group, the conventional rule of thumb suggests that by your 40s, retirement savings should equal three times your annual salary. For someone earning $60,000 per year, this would mean having approximately $180,000 set aside by age 40.

Matthew Cleary, a CFP and financial planner at Sentinel Group, takes an even longer view. He recommends that by the time you retire, you should have accumulated at least 10 times your pre-retirement income in retirement savings. Working backward, this suggests that reaching three times your annual salary by your 40s puts you on a reasonable trajectory.

These are starting points, not guarantees. As Sexton notes, the actual amount you need depends on numerous variables: inflation rates, anticipated healthcare costs, the number of dependents you support, other income streams in retirement, and your desired lifestyle. However, having reached three times your salary by 40 generally positions you favorably compared to actual savings data.

The Gap Between Expectations and Reality at Midlife

The psychological and financial gap becomes apparent when comparing what Americans actually have saved versus what they expect to have by retirement. Among those aged 35 to 43, 20% believe they will retire with less than $50,000 in their 401(k), while 51% anticipate having between $50,001 and $1 million. Only 20% are confident they’ll exceed $1 million.

When asked about their confidence in reaching the $1 million retirement savings milestone, the responses among midcareer professionals reveal significant anxiety. Fully 35% of older millennials say there’s a “very small chance” they’ll achieve this goal, while 34% believe it’s “impossible.” Among Gen X (ages 45 to 54), pessimism is similarly widespread: 31% say the odds are slim, and 42% believe reaching $1 million in 401(k) savings is impossible.

This disconnect between expert benchmarks and personal confidence suggests that many Americans in their 40s feel they should have saved more—and that catching up might be unrealistic with their current trajectory.

Building Your Path to a Million: Start Early or Play Catch-Up?

For those concerned about whether they have saved enough by 40, or whether they can still reach meaningful retirement goals, the timing of when you began saving matters considerably. According to Cleary’s analysis, a 22-year-old planning to retire at 67 with an annual 8% return would need to save approximately $2,600 per year to accumulate $1 million. However, someone who delays saving until age 32 would need to contribute $5,800 annually to reach the same goal—more than double the amount.

This illustrates a fundamental principle: for those in their 40s who haven’t yet accumulated what experts recommend, accelerating contributions becomes critical. Those who started late need to save more aggressively to compensate for lost compound growth.

The survey data shows that among Americans aged 55 to 64—those on the cusp of retirement—28% still hold only between $50,001 and $100,000 in their 401(k) plans. For this group, reaching traditional retirement benchmarks becomes increasingly difficult. Yet remarkably, 8% of Americans aged 65 and older report having $500,001 or more in their 401(k) plans, suggesting that some people do achieve substantial savings despite later starts or interrupted careers.

The Path Forward for Your 40s

If you’re in your 40s wondering how much you should have saved by now, the experts’ benchmark of three times your annual salary provides a useful target. If you’re below that threshold, there’s still time to accelerate contributions and take advantage of catch-up provisions for those over 50. If you’re above it, you’re ahead of most Americans in your age group, though continued disciplined saving remains essential.

The key insight from the broader data is this: Americans consistently underestimate their retirement needs and overestimate their ability to catch up later. By establishing clear savings targets now and maintaining consistent contributions—potentially increasing them during economic expansions—you can still build meaningful retirement security even if your 401(k) balance isn’t yet where you think it should be by 40.

The difference between starting early and playing catch-up at midlife is substantial, but the gap can be narrowed with intentional planning and increased savings rates during your most productive earning years.