Here’s something you may not have thought about when you celebrated your 40th birthday: You’re about as close to traditional retirement age as you are to your high school graduation. Feeling old yet?
If that thought stirs a bit of fear in your heart, you’re not alone. The Employee Benefits Research Institute of America reports that 14% of workers have less than $1,000 saved for retirement.1 To make matters worse, 18% of adults ages 50 and older have no retirement savings and 61% worry about not having enough to support themselves post-retirement.2 Yikes!
If you’re one of those folks (or heading that way), there should be all kinds of alarms going off in your head. This is your wake-up call!
We’re not going to beat around the bush here: You’ve got your work cut out for you if you want to become a millionaire. But don’t give up hope! Even if you’re 40 years old with nothing saved for retirement, not only is it possible to build a $1 million nest egg by the time you reach your golden years—it might not be as hard as you think to get there.
So you’ve hit the big 4-0 and suddenly realized your retirement account looks emptier than your coffee mug on Monday morning. Take a deep breath—you’re not alone, and it’s definitely not too late to turn things around!
According to data from the Employee Benefits Research Institute, about 14% of workers have less than $1,000 saved for retirement. Even more concerning, 18% of adults over 50 have absolutely zero retirement savings. Yikes!
But here’s the good news your 40s are actually your prime earning years, making this the perfect time to kickstart your retirement savings journey. Let me show you why it’s not too late and how you can still build that million-dollar nest egg you deserve.
The Reality Check: 40 With No Savings
Let’s be honest—hitting your 40th birthday means you’re about as close to traditional retirement age as you are to your high school graduation Feel old yet?
But this isn’t the time to panic. Instead, it’s time to get serious about your financial future. While you’ve missed some early years of compound interest (the financial equivalent of magic), you’ve still got 25+ years to build substantial wealth before typical retirement age.
Why Your 40s Are Actually Perfect for Retirement Catchup
Your 40s come with some serious financial advantages that your younger self didn’t have
- Peak earning potential – According to the U.S. Census Bureau, households aged 35-44 have a median income of $96,630, with those 45-54 earning even more at $101,500
- Career stability – You’re established in your career and likely more valuable to employers
- Life experience – You’ve learned from past money mistakes
- Focus – You’re probably more disciplined than you were in your 20s
Think of it this way: If you’ve dug yourself into a retirement savings hole, at least now you have a bigger shovel to dig yourself out!
The Math: Yes, You Can Still Become a Millionaire!
Let’s crunch some numbers. If you’re 40 years old with a household income of $80,000 and invest 15% ($1,000 monthly) in good growth stock mutual funds, by age 65 you could have:
$1.5 MILLION
And if you work until 70? That number jumps to about $2.8 MILLION!
That’s right—you can still retire a millionaire even with a late start and an income below the national average. But the key is starting TODAY.
5 Strategies to Catch Up on Retirement Savings at 40
1. Eliminate All Debt ASAP
About 30% of Americans’ monthly income goes to paying off consumer debt. That’s money that could be building your future!
Debt is like trying to climb Mount Everest with a backpack full of bricks—you’re not going to get very far. Here’s what to do:
- Use the debt snowball method to tackle your debts from smallest to largest
- Put retirement savings on temporary hold while you eliminate debt
- Build a 3-6 month emergency fund once debt-free
- THEN kickstart your retirement investing with that freed-up cash flow
When you don’t have payments to banks and credit card companies, you suddenly have money to invest in yourself!
2. Make Retirement Savings Non-Negotiable
When creating your monthly budget, follow this order: give, save, spend.
- Set aside 10% for giving (yes, even while catching up)
- Allocate AT LEAST 15% of your gross income for retirement
- Then budget for monthly expenses (essentials first, then non-essentials)
The key is creating a zero-based budget where every dollar has a job. And retirement savings isn’t something you do “if there’s money left”—it’s a priority right after giving.
You might need to cut back on dining out, cable TV, or fancy vacations for a while. But trust me, the peace of having a secure retirement is worth skipping a few lattes now.
3. Max Out Your Workplace Retirement Plans
Did you know that 8 out of 10 millionaires invested in their company’s 401(k) plan? Here’s what to do:
- Contribute at least enough to get your employer’s full match (free money!)
- Be aware of vesting periods (usually 3-5 years)
- Choose a Roth 401(k) if available (tax-free growth!)
- If no Roth 401(k), invest up to the match in traditional 401(k) then open a separate Roth IRA
For self-employed folks, a Roth IRA is your best friend. The key is to use tax-advantaged accounts to maximize your growth potential.
4. Take Advantage of Catch-Up Contributions
Once you hit 50, the government gives you an extra opportunity to save:
- 401(k) catch-up contributions: additional $7,500 annually (2024)
- IRA catch-up contributions: additional $1,000 annually
That’s free money in tax advantages waiting for you in a decade!
5. Work With a Financial Advisor
I cannot stress this enough—find a good financial advisor! Why?
- They provide objective guidance when markets get crazy
- They help you make rational decisions instead of emotional ones
- They give you a comprehensive view of your retirement strategy
- They keep you accountable to your goals
Let’s be honest—if you’ve handled your retirement savings perfectly so far, you wouldn’t be reading this article! Now’s the time to get professional help.
Real Talk: Making Sacrifices Now for Freedom Later
I’m not gonna sugar-coat it—catching up on retirement at 40 requires sacrifice. You might need to:
- Drive your car a few years longer
- Take more modest vacations
- Cut back on dining out
- Consider downsizing your home
- Pick up a side hustle for extra investment cash
But these are TEMPORARY sacrifices for PERMANENT freedom. The alternative—working well into your 70s or 80s because you have to, not because you want to—is much worse.
Common Questions About Retirement Saving at 40
Is it really possible to retire comfortably if I start at 40?
Absolutely! While starting earlier is always better, 40 gives you 25+ years of compounding. Remember our example—$1,000 monthly at average market returns could give you $1.5 million by age 65.
How much should I have saved by 40?
The average retirement savings for Americans in their 40s is about $93,000. But honestly? Focus on what you can do NOW, not what you should have done. The past is past—let’s build your future!
Should I be aggressive with investments to catch up?
Being aggressive doesn’t mean being reckless. Stick with proven investments like good growth stock mutual funds with long track records. The key is consistency and proper diversification, not chasing get-rich-quick schemes.
Can I still retire at 65 if I start at 40?
Yes! But you might need to:
- Save more than 15% of your income
- Consider working a few extra years (even part-time)
- Be more aggressive with cutting expenses
- Delay taking Social Security to maximize benefits
My Final Thoughts
Look, I get it. Facing retirement savings at 40 with nothing in the bank is scary. It feels like you’ve missed the boat. But I promise you—it’s NOT too late.
Your 40s and 50s are actually your financial power years. With focus, discipline, and the right guidance, you can absolutely build a retirement nest egg that will let you live with dignity and even luxury in your golden years.
The most important thing? START TODAY. Not next month. Not after the holidays. TODAY.
Because while the best time to plant a tree was 20 years ago, the second best time is now. And your future self will thank you for taking action, even if it’s later than ideal.
What step will you take today to begin your retirement catchup plan? The clock is ticking—but you’ve still got plenty of time to win this race!
Invest in your 401(k) or open a Roth IRA.
Where should you put your money to get the most bang for your buck? The easiest and often most effective way to get started is through your workplace retirement plan like a 401(k). In fact, 8 out of 10 millionaires invested in their company’s 401(k) plan, according to The National Study of Millionaires.
Most employers who offer a 401(k) will match a portion of your investment, so invest enough to get the full match for an instant and guaranteed 100% return on your money! But quick note: It’s important to be aware of your employer’s vesting period—the amount of time you need to work for them before you fully own those matching contributions (usually around 3-5 years).
If your employer offers a Roth 401(k) option and the plan offers a choice of good growth stock mutual funds, you can invest the entire amount in your workplace plan. If a Roth 401(k) isn’t available, simply invest up to the employer match in your 401(k) and then open a separate Roth IRA to invest the remainder. The Roth IRA is also a solid option for you self-employed folks.
Make saving for retirement a priority in your budget.
If you don’t plan your spending each month, it’s easy to feel like you’re broke all the time. Isn’t that why you’re behind on retirement savings now? A budget allows you to set your spending priorities before the month begins, so you always know where your money’s going and how it’s working for you.
When you sit down to make a budget, you should plan in this order: give, save, spend. Here’s what that looks like:
- First, set aside some of your income for giving. We believe you should give 10% no matter where you are on your financial journey. After all, giving is the most fun you will ever have with money, and you can’t put a price tag on having a spirit of generosity!
- Second, you should budget for your savings goals. If you’re on Baby Step 4, that means investing at least 15% of your gross income for retirement. No exceptions!
- After that, you can move on to budgeting for monthly expenses. Start with the essentials (like food, shelter, utilities and transportation) before moving on to any nonessentials (like fun money and entertainment).
Pro tip: When you subtract all your expenses (giving, saving and spending) from your income, it should equal zero. That’s what we call a zero-based budget, and that’s a good thing! It means you’ve given every dollar an assignment. Good job!
When you regularly make generosity and saving a part of your life, eventually it becomes a habit that gets easier and easier over time. You might have to cut back on some things like eating out or traveling to make room for retirement savings. But making that sacrifice now means you won’t be sweating bullets by the time you want to retire.