Table of Contents
Key Points
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Starting to save in your 40s is pretty late, and you have less time for compound growth to work for you.
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This doesn't mean millionaire status is off the table if you start investing in your 40s.
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You should set a clear savings goal, take advantage of tax breaks, and claim any employer matching funds to hlep you hit savings goals.
- The $23,760 Social Security bonus most retirees completely overlook ›
Americans believe that they will need $1.26 million saved for retirement, according to a survey by Northwestern Mutual.
Whether this is correct really depends upon the spending habits of retirees as well as their timeline for retirement, as that amount of income today would produce around $50,400 per year.
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That could be enough if you only made $60,000 during your working years — but not necessarily if you made $200,000. It could also be enough if you're retiring soon, but it may not be if you're retiring in a few decades and inflation has reduced buying power.
Regardless, if you assume that you'll need at least $1 million, that can feel like a daunting amount to save — especially if you are starting late and are in your 40s already. If that's your situation, it's natural to wonder if it's even possible to achieve millionaire status by the time you're ready to retire.
So, can you end up with a seven-figure nest egg if you're just starting to save in your 40s? Let's find out.
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Is becoming a millionaire possible if you start saving in your 40s?
There's both good news and bad news. The good news is that if you invest enough, you absolutely can become a millionaire by retirement if you start saving in your 40s. The bad news is that you're probably going to need to invest a lot in your retirement plans to make it happen.
The issue is that while compounding will help you grow your account balance, your late start means you don’t have as many years to earn returns that can be reinvested. This doesn’t mean you can’t achieve your goal, though. You’re just going to have to save more.
How much more? The table below shows what you'd need to save each month depending on the exact age when you start investing. It assumes that you want to retire at your full retirement age. That’s the age when it becomes possible to collect Social Security with no early filing penalties. If you were born in 1960 or later, it’s 67. It also assumes you earn a 10% average annual return, which is around what the S&P 500 has consistently produced.
| If You Start Investing At… | You Must Save This Much Each Month to Have $1 Million by 67 |
|---|---|
| 40 | $688.14 |
| 41 | $763.25 |
| 42 | $847.34 |
| 43 | $941.65 |
| 44 | $1,047.65 |
| 45 | $1,167.09 |
| 46 | $1,302.03 |
| 47 | $1,454.97 |
| 48 | $1,628.91 |
| 49 | $1,827.52 |
Table calculations by author. Table source: Investor.gov
How to hit your savings target
As you can see, there is a very big difference between starting to save at 40 and starting to save at 49. Putting off investing even by a few years could mean you have to save much more later — so start investing at least something today to get compound interest to work for you. If you can’t hit these goals, something is better than nothing.
You should also:
- Take advantage of any company match that may be available to you if you have a workplace 401(k)
- Claim as many tax breaks as possible by investing in your IRA
- Automate your contributions so saving becomes the default
Depending on your income, it is definitely not impossible to end up a millionaire if you start investing in your 40s — especially if you are in the early part of this decade of life.
You will need to make more sacrifices than if you'd started investing young, but since you can't go back in time and change that, the best thing you can do is get started now so you're not looking back in a few years wishing you hadn't waited even longer to act.
The $23,760 Social Security bonus most retirees completely overlook
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