How Much Money Should I Have in a Brokerage Account by Age 40?

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

If you’re age 40, you might feel behind on retirement savings — or you could be totally fine. See how much should be in your brokerage account. [[{“value”:”

How much money should you have saved for retirement by age 40? As a personal finance expert and long-time investor, this question makes me a little uncomfortable. It’s a tough, kind of unfair question because it’s impossible to know if you’re ever saving enough for retirement at age 40, or at any age. The future is unknowable.

The stock market could skyrocket, plummet, or go sideways for a Nikkei 225 index–style “lost decade.” You could get a big promotion at work, start a thriving business, have a setback in your career, or suffer a health problem that derails your plans. And much of it is beyond your control.

Let’s look behind the numbers and see what it really means for how much you should have saved by age 40 — and how you can boost your investments for the future.

Basic rule of thumb: Three times your salary saved by age 40

Similar to the much-recited personal finance advice that everyone should have three months of emergency savings, there’s a common rule of thumb in retirement planning that by age 40, you should have three times your salary saved for retirement. This “three-times salary” amount could include investments in your 401(k), traditional individual retirement account (IRA), Roth IRA, and taxable brokerage account.

If you’re not already saving for retirement at work in a 401(k) or other employer-sponsored plan, you should definitely do that. But if you want to boost your savings even more, start by opening an IRA (traditional or Roth, or both if you qualify).

Click here to learn more about the best IRA accounts from top-ranked online brokers and trading platforms. These brokerages make it easy for you to open an extra retirement investment account outside of your job.

But just like the three-month emergency fund rule, the three-times salary rule is not realistic. According to recent data from Vanguard in the How America Saves 2024 report, the typical 40-year old Vanguard customer has only $35,537 saved in their 401(k) or other direct contribution workplace retirement plan.

But the median U.S. salary for a 40-year-old is $1,247 per week, or $64,844 per year. That means the typical 40-year-old should have $194,532 saved for retirement — but most people are nowhere near that.

Is it too late to save for retirement at age 40?

Here’s why the “three-times salary by age 40” rule grinds my gears: It makes people feel bad about themselves. If you don’t have this much saved, you might feel inadequate.

But your retirement plan isn’t hopeless! Here are a few fun facts about your retirement:

If you’re 40 years old in 2024, you have 27 more years until Social Security retirement age. You have 27 more lucrative years to work, save, invest, and let your money grow.If you have the typical amount of retirement savings at age 40, you have a good start — and you still have time to save more, invest, and let your money grow.If you’re 40 years old, your peak earning years may still be ahead.You’re going to get some Social Security income in retirement — the typical retiree’s benefit check as of January 2024 was $1,907 per month. That’s far better than nothing!

How your retirement savings can grow from age 40

If you’re the typical 40-year-old with $35,537 saved for retirement, don’t feel bad. Let’s look at how your retirement savings can grow. We’re going to assume:

You have the typical 40-year-old’s $35,537 already saved for retirement.You earn the typical 40-year-old salary of $64,844 per year.You save 10% of your salary for retirement (including employer contributions) — $6,500 per year, or $542 per month.You invest your retirement savings in a diversified portfolio of mostly stock and bond ETFs that earns an average annual return of 8%. (This is not unrealistic; the S&P 500 index has delivered an average annual return of 10.7% for the past 30 years.)You work, save, and invest this way for the next 27 years until your Social Security retirement age of 67.

After 27 years, you will have $852,001 for retirement. If you withdraw 4% of your portfolio per year, that makes an annual income of $34,080. Add about $2,000 per month ($24,000 per year) from Social Security, and that means your total retirement income would be $58,080.

That adds up to about 89.5% of the typical 40-year-old’s current salary — which is actually really good! That’s on the high side of what retirement planning experts recommend. (That’s another rule of thumb: You should try to save enough for retirement so that you can replace 75% to 80% of your working years income.)

Based on our calculations, the typical 40-year-old isn’t so far behind on retirement savings after all. Take that, “three-times salary” rule!

Bottom line

Retirement planning isn’t a race. Instead of worrying about whether you’re behind, take a deep breath and think about how much time you still have ahead of you to earn, save, and let your money grow.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More