How Much Money Should You Have in Your 401(k) by Age 40?

While you don't need to continually monitor your retirement savings progress -- especially in a hands-off investment account like a 401(k) -- it's a good idea to check in every so often to get an idea of where you stand. But how much is enough, especially if you're still a couple decades or more from retirement age?

Let's look at one guideline that you can use to decide whether you're making good retirement savings progress at age 40, and what you can do if you've fallen behind.

How much should you have saved for retirement by age 40?

There's no certain dollar amount that the average person should aim for. After all, someone with a $50,000 annual income likely has different retirement savings needs than someone who makes $200,000.

Fidelity offers some income-based retirement savings guidelines for various ages that we can turn to. According to Fidelity, the typical 40-year-old should aim to have three times their salary saved for retirement. In other words, if you have a $100,000 salary and have $300,000 in your 401(k) or other retirement accounts, you're on the right track.

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If you're curious, Fidelity also says that you should aim for:

• Six times your salary in retirement savings by 50
• Eight times your salary in retirement savings by 60
• 10 times your salary in retirement savings by the time you retire

Also, Fidelity's guidelines are for total retirement savings, not just what you have in a 401(k) or employer-sponsored retirement plan. In other words, if you have money in a standard (taxable) brokerage account that you plan to use toward retirement, or if you save money in an IRA, that can be considered retirement savings for the purposes of these savings targets.

Not a perfect rule of thumb

It's important to point out that Fidelity's retirement savings targets are based on the average American who aims to retire at age 67. The ideal savings for you could be higher or lower depending on your plans and financial situation.

For example, those who have pension plans at work instead of 401(k)s or other retirement plans might not have a ton of cash saved for retirement, even though they're on track to have a sufficient income stream after they leave the workforce. Or, if you plan to retire significantly earlier or later than age 67, you might want to set your savings targets accordingly.

To be clear, Fidelity's savings targets are certainly good guidelines for the average American. But it's important to take your personal situation into account as well.

Are you behind?

If you don't quite have three times your salary saved right now, don't panic. The good news is that at age 40, you still have about 25 years until you reach the typical retirement age, so there's time to catch up. Consider increasing your 401(k) contribution rate if you participate in an employer's retirement plan, or you could choose to contribute to a traditional or Roth IRA instead.

Whatever you decide, the point is that there's still quite a bit of time on your side, and the long-term compounding power that comes with it. The "three times your income" suggestion should be used as an indicator of whether your savings plan is on track or if you need to prioritize retirement savings a little more.