Here's How Much You Should Have Invested for Retirement at Age 40

To be clear, if you ask several financial planners how much you should have saved for retirement by the time you're 40, you're likely to get some different answers. There's no perfect guideline, and the amount of retirement savings you should have depends heavily on your personal situation, goals, and lifestyle expectations, as we'll discuss later.

With that in mind, Fidelity's retirement target for age 40 says that you should have three times your salary in retirement accounts.

So, if you earn $100,000 per year, this guideline says that you should have $300,000 set aside for retirement by the time you're 40. This is based on a few things, but mainly on the assumptions that:

• You'll need about 80% of your pre-retirement income after you leave the workforce in order to maintain the same standard of living.

• You'll retire at 67 years of age, at which time the goal will be to have 10 times your salary in retirement savings.

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A few things to think about

Of course, these are just guidelines, not set-in-stone rules that apply to everyone. Here are just a few of the other factors that determine how much you should have saved.

Social Security

Social Security isn't designed to be your only source of retirement income, but it is a factor when determining how much you need to withdraw from savings. Full retirement age for Social Security is 67 years old for people born in 1960 or later, and you can get a personalized estimate of your expected retirement benefit by viewing your latest Social Security statement. You can do this by logging on to SSA.gov and creating a my Social Security account if you haven't already.

Retirement age

Full retirement age for Social Security purposes is 67 years old for people who are 40 years old today, and that's the age Fidelity's savings guidelines are based on. But retirement age plays a big factor in how aggressively you should be investing, especially when you're relatively young.

For example, maybe you have ambitions to retire at 60, or even sooner. If that's the case, your savings targets should be accelerated. On the other hand, many people plan to work well into their 70s. The point is that your desired retirement age should certainly be considered. But if you're planning on delayed retirement, keep in mind that things happen, and you might not be able to work for as long as you expect.

How much income do you need?

One of the most important retirement concepts to understand is that it isn't necessarily about how much money you have in the bank. It's about how much income you'll need after you retire.

For example, if you retire with your home and car(s) paid off, you'll need to draw significantly less income from your savings than if you have a mortgage and car payment. Similarly, if you plan to live a modest lifestyle, you'll need less income than if your goal is to travel extensively or pursue any expensive hobbies.

Other income sources

Fidelity's retirement savings guidelines are also based on the assumption that other than Social Security, you won't have any major income sources after you retire. If you're expecting a pension, for example, this changes the equation significantly.

As a personal example, my father-in-law recently retired, and although he doesn't quite have 10 times his salary in retirement accounts, he has a pension. Combined with Social Security, he's making more money now than when he was working, even with a very modest withdrawal rate from savings.

What if you've fallen behind?

There's no perfect rule when it comes to saving for retirement, and it's also important to keep in mind that when you're 40, you are still decades away from the typical retirement age. So, if you've fallen behind, there's still plenty of time to course-correct and start saving more aggressively and to let your investments grow.

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