How Much Should Have I Saved By 40

If you haven't started retirement planning by the time you are in your 40's, you have some real catching-up to do.  That being said, retirement planning in your 40s is perhaps the single most important step you can take to prepare yourself for those retirement years.

Retirement Planning Opportunities
Working in your 40s is like halftime in a football game. Your career is about half over, and it's time to stop the game, assess where you are, and rethink your opportunities and plans.


You have twenty years of work behind you, and roughly twenty years of work ahead. If you haven't been saving for retirement, it's time to get started. If you've been socking money away for years, then it's a good time to reassess where you are, and what you need to do over the next twenty years.

Time and Retirement Planning

Since you're at the half way point, we're going to make a couple of comparisons using our retirement savings calculator, so that you can see some of the different scenarios you might be faced with in the future and right now.

For example, we are going to illustrate what the retirement plans might look like for a 45 year old that had been saving through the years, versus one that is just starting to save for retirement. We're also going to demonstrate what happens if you decide to wait another ten years before setting money aside for those retirement days.

Retirement Savings Examples

Current Age	45	45	55
Desired Retirement Age	65	65	65
Annual Household Income	$80,000	$80,000	$90,000
Anticipated Income Growth Rate	3.0%	3.0%	3.0%
Desired Income Replacement Rate	70%	70%	70%
Current Retirement Assets	$75,000	$4,000	$4,000
Expected Return on Investments	6.0%	6.0%	6.0%
Expected Pension at Retirement	$33,000	$33,000	$33,000
Social Security at Retirement	$30,000	$30,000	$30,000
Ongoing Annual Savings Required	$5,354	$11,544	$18,310

In this example, a 45 year-old that has already saved $75,000 needs to save about $5,300 annually to meet their desired income replacement rate of 70% when retired. But a 45 year-old that has a minimal amount of retirement savings needs to save at more than double that rate, nearly $12,000 per year.

More importantly, if that same 45 year-old waits until age 55 to start saving for retirement, then they need to set aside over $18,000 a year! Saving that much money each year will truly present that individual with a lifestyle challenge. That's roughly 20% of their pre-tax income that needs to be set aside each year until the day they retire.

SOURCE: http://www.money-zine.com/Financial-Planning/Retirement/Retirement-Planning-in-Your-40s/