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Retirement planning in your 40s: How to save, invest & catch up

July 11, 2025
Last revised: July 11, 2025

In your 40s, retirement can seem like a distant goal. But planning for it now can make it easier to achieve and keep you from falling behind.
Laughing couple putting away groceries in kitchen
Thomas Barwick/Getty Images

Key takeaways

  1. Your 40s are a crucial time to plan for retirement while you have peak earning years to take advantage of and time for savings to grow. 
  2. Starting to sketch your retirement plans in more detail can help you determine what your savings target should be. 
  3. Making sure contributions are part of your monthly budget and automating them can help you stay on track.

Saving for retirement in your 40s comes with both opportunity and pressure. You still have time to make meaningful progress, but life in this decade can be financially complex. Mortgage payments, caring for aging parents and everyday expenses all may be competing for your attention. That's what makes your 40s such a pivotal time to pause and reassess your retirement strategy.

Before you move forward, it's important to understand where you stand today. While retirement may still feel far off, the decisions you make now can help shape the future you envision.

How much should I have saved for retirement by 40?

Many financial experts recommend having at least three times your annual salary saved by age 40 as a retirement savings benchmark. By the time you turn 50, your retirement savings balance should be up to six times your annual pay. According to the Survey of Consumer Finances, the average retirement savings for people between the ages of 35 and 44 is $141,520.

That may or may not be enough depending on your financial circumstances and goals. It's hard to pinpoint how much you should have in your 401(k) at 40, but guidelines and averages can give you starting points. Adjust them to fit your lifestyle, budget and priorities so you can reach your retirement goals on the timeline you choose.

It's ideal to have 3 times your annual salary saved by the time you're 40. That increases to 5-6 times your salary by age 50.

What if I have less saved for retirement at 40 than I should?

Age-based targets are helpful guideposts to help you chart your course—not rigid rules. If you're behind at 40, don't panic you still have a lot of years of saving ahead of you to build momentum. Rather than drastic savings measures that aren't sustainable, make small, manageable changes to the way you approach money and give yourself time to close the gap.

Start by reviewing your budget to find ways you can increase your retirement contributions. You don't have to cut all the fun from your spending, but reprioritize so that you're working toward both short- and long-term financial goals. If you have an employer retirement plan, figure out a manageable percentage of your paycheck that could be automatically routed there. If you get an unexpected windfall like a bonus or a cash gift, consider using it to bulk up your retirement account.

As long as you're making progress with your retirement savings, you're better off than delaying saving or not saving at all.

Step-by-step guide: How to save enough for retirement by age 40

If your goal is to have three times your annual salary saved for retirement by 40 and six times by 50, you'll need a focused retirement savings strategy to get you there. Here are some practical steps to help you build your retirement nest egg in your 40s and stay on track for long-term financial security.

1. Start early: How time and compound interest grow your retirement savings

For long-term investments like retirement, investment compounding and compound interest are generally the biggest drivers of your account balance. If you've already been saving for a while, you may have seen some of the effects of this. But consider that in your 40s, you likely still have a couple of decades before you retire. If you can get started now vs. later, time can make a lot of difference in how much your money can earn.

  • Let's say you're just turning 40 and can afford to save $500 per month for retirement in an account that's projected to have a 7% average annual return rate. By age 65, you would have contributed $150,000 and earned $229,494 in compound interest for a balance of $379,494. 
  • But maybe you're also thinking about holding off to start to save heavily for retirement until 50, when you think you'll be able to put away $1,000 per month with the same average annual return rate. By age 65, you would have contributed more — $180,000 — but only earned $121,548 in compound interest for a balance of $301,548. (Examples are based on the interest calculator at Investor.gov.) 

The earlier you start saving, the more you benefit from compound interest—one of the most powerful tools for long-term growth.

2. Maximize employer-sponsored retirement plans like 401(k)s and 403(b)s

Specially designated retirement accounts let you save a sizeable amount of money every year and take advantage of either tax-deferral now (traditional accounts) or tax-free withdrawals later (Roth accounts). As a work-related benefit, employers may offer a 401(k), 403(b),457(b), or a Thrift Savings Plan. These plans often feature low fees and automatic payroll deductions, making it easy to stay consistent with your retirement contributions.

TIP: Be sure to get the matching employer contributions

If there's an employer match with your retirement plan, try to contribute the maximum that will be matched. It's essentially free money that doubles your contributions, usually up to a certain percentage. Let's say your employer offers a 5% match. If you make $70,000 a year and put at least 5% in your account, you'd get $3,500 in matching contributions from your employer. Factor in long-term compounding as well, and suddenly that fraction of your paycheck brings monumental potential to your retirement savings.

3. Automate contributions and gradually increase your savings rate

Automatic savings contributions, whether it's from your paycheck or a scheduled bank transfer, reduce the temptation to spend extra money. It helps to look at your budget for ways to save and determine what amount could be diverted to savings. You can start small with an amount that won't impact your essential spending—maybe 2% to 5% of your income. Once it's automated, you may not even miss it. When your income goes up, you can gradually increase that automated amount, even if it's just a bit at a time. Aim to increase your retirement savings rate to 10% to 20% of your income over time, especially during peak earning years.

4. Boost retirement savings with a traditional or Roth IRA

If you aren't covered by a retirement plan at work or have contributed the maximum and want to save more, an IRA is another kind of tax-advantaged retirement account that you can open on your own.

The best type of IRA for you depends mostly on your current and expected future tax liabilities:

  • Traditional IRAs provide an upfront income tax deduction when you contribute, and taxes are deferred until you make withdrawals. 
  • Roth IRAs don't reduce your annual income for tax purposes, but your after-tax contributions won't be taxed again. Plus, any earnings may be entirely tax-free when you take qualified withdrawals. 

IRAs also serve as a rollover option for a 401(k), 403(b) or other workplace retirement accounts when changing jobs, giving you more control over your retirement investments. Moving that money into an IRA that you manage can give you easier access and more control.

5. Explore additional investment options beyond retirement accounts

Employer retirement plans and IRAs aren't the only way to invest for retirement. It's often a smart approach to spread your savings and investments across different kinds of tax buckets. With several years before retirement, you might explore long-term investments like stocks, mutual funds and exchange-traded funds (ETFs). You'll want to let your goals, time horizon, risk tolerance, and other individual factors guide your asset allocation.Target-date funds automatically adjust your asset allocation based on your anticipated retirement year, offering a hands-off investment strategy.

In your 40s, taking investing risks isn't necessarily a bad thing, but make sure you know about the potential benefits of tactics like portfolio diversification and dollar-cost averaging. A financial advisor can give you guidance about the right kinds of retirement investments for you.

6. Use a health savings account (HSA) for tax-free retirement healthcare

Health savings accounts are triple tax-free: You can deduct contributions, any earnings grow tax-free and withdrawals are tax-free when spent on qualifying health care costs. With health care costs in retirement rising, HSAs can offer a triple tax advantage and serve as a powerful supplement to your retirement plan. But also, once you reach age 65, you can spend HSA money on anything without facing penalties, although you'll still have taxes on anything that isn't a qualified expense.

Smart retirement savings strategies for your 40s

Here are a few more ways to save for retirement in mid-life that don't involve major lifestyle changes to meet your savings goals.

Use budgeting to find savings opportunities

A budget can bring clarity to your overall spending habits and identify unnecessary costs. Review your credit card and bank statements to see if you have any recurring expenses or nonessential spending that could be redirected toward retirement savings, such as a premium membership or subscription service you don't use. Also keep an eye out for lifestyle inflation, which happens when your nonessential spending keeps rising as your income increases.

Budgeting doesn't mean you never get to indulge and splurge, but reviewing your expenses can help you identify which ones are less of a priority to you than having a secure financial future.

Adopt the 'pay yourself first' method to prioritize saving

The pay yourself first method can be one of the easiest financial habits to adopt, thanks to automation. Each time you receive a paycheck, put some of the money into savings before you do anything else. This strategy helps ensure your long-term financial goals—like retirement—are funded before short-term discretionary spending takes over.

Balance debt repayment with retirement contributions

If you carry a credit card balance or other debt, it's crucial to balance paying what you owe with your essential spending and your future saving. Accounts that go unpaid may rack up fees and interest, but you also don't want to neglect your savings for the sake of paying off every debt. As you work through whether to save for retirement or pay debts, explore strategies that help you prioritize what gets paid, such as the snowball and avalanche methods, and understand the distinction between good debt vs. bad debt. Having a strong handle on your debts helps you allocate funds wisely for repayment and retirement contributions.

Prepare an emergency fund to protect your retirement savings

Emergency funds give you something to pull from in situations where your income takes a hit, such as a layoff or unexpected car repair. An emergency fund acts as a financial buffer, helping you avoid dipping into retirement accounts during unexpected expenses.

Use insurance to protect your retirement plan

Consider having some protective coverage, such as life insurance with cash value and disability insurance. Life and disability insurance provide financial protection that helps you maintain consistent retirement contributions, even when life's unexpected events happen.

Conclusion

Your 40s are a great time to get serious about planning for retirement and take steps to secure your financial future. You may find it helpful to lean on an expert who understands your values and your vision for life after full-time work. A Thrivent financial advisor can help you create a personalized retirement strategy that aligns with your values, goals and long-term financial vision.
*Methodology: This research was conducted in June 2022 among a national sample of 1,500 adults in order to measure their sentiments, financial planning, knowledge, and issues regarding retirement. The interviews were conducted online and the data was broken into three sample groups; Saving, Nearing, and Retired. Results from the full survey have a margin of error of plus or minus 3 percentage points

1For 2023, your contribution deduction is reduced if MAGI is between $73,000 and $83,000 on a single return and $116,000 and $136,000 on a joint return. If you're married filing jointly and an active participant in an employer sponsored retirement plan and your spouse is not, the deduction for your spouse's contribution is phased out if MAGI is between $218,000 and $228,000. For 2024, your contribution deduction is reduced if MAGI is between $77,000 and $87,000 on a single return and $123,000 and $143,000 on a joint return. If you're married filing jointly and an active participant in an employer sponsored retirement plan and your spouse is not, the deduction for your spouse's contribution is phased out if MAGI is between $230,000 and $240,000. If you're a married taxpayer who files separately, consult your tax advisor.

2Distributions of earnings are tax free as long as your Roth IRA is at least five years old and one of the following requirements is met: (1) you are at least age 59½; (2) you are disabled; (3) you are purchasing your first home ($10,000 lifetime maximum); or (4) the money is being paid to a beneficiary.

3 While diversification can help reduce market risk, it does not eliminate it. Diversification does not assure a profit or protect against loss in a declining market.

4 Dollar cost averaging does not ensure a profit, nor does it protect against losses in a declining market. Because dollar cost averaging involves continuous investing, investors should consider their long-term ability to continue to make purchases through periods of low price levels and varying economic periods.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.
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