How Much Money Should I Have Saved by My 40s & 50s?

Highlights:

• The average savings for people in their 40s and 50s varies based on earnings, lifestyle and other factors. Try to set savings goals that are proportionate to your income.
• By the time you reach your 40s, you'll want to have around three times your annual salary saved for retirement. By age 50, you'll want to have around six times your salary saved.
• If you're behind on saving in your 40s and 50s, aim to pay down your debt to free up funds each month. Also, be sure to take advantage of retirement plans and high-interest savings accounts.

What do your financial goals look like for your 40s and 50s? Maybe you'll be paying down your mortgage, covering a child's college tuition or looking ahead to retirement. Hopefully, you'll have spent your 20s and 30s establishing your savings. But what can you do to save more money if you feel you're falling short?

Here's how to estimate how much money you should have saved by your 40s and 50s, plus strategies for saving more money if you need to catch up to your goals.

How much money to save by age 40 and 50

The average savings for people in their 40s and 50s varies based on earnings, living expenses, debts and overall lifestyle. So, there's no single dollar amount that can fit everyone's financial situation. Instead, aim to set savings goals that are proportionate to your income.

As you reach your 40s and 50s, saving for retirement will become one of your most important goals. As a general rule of thumb, you'll want to have saved three to eight times your annual salary, depending on your age:

• 40: At least three times your salary
• 45: Around four times your salary
• 50: Six times your salary
• 60: Eight times your salary

These goals include savings in retirement accounts such as a 401(k) or IRA, as well as any regular savings or checking accounts.

In addition to retirement savings, you'll want to build a dedicated rainy day (or emergency) fund to cover three to six months' worth of expenses. You can use this cash to pay for any unexpected costs — from medical bills to major home repairs. Having these funds on hand can help you avoid dipping into your other savings accounts or having to rely on high-interest credit cards during an emergency.

Beyond retirement savings and a rainy day fund, it's generally recommended to set aside at least 20% of your after-tax income each pay period. Your additional savings might go toward paying off your mortgage, funding an education or financing home renovations.

How to save more money in your 40s and 50s

If you feel you're falling short of your savings goals in your 40s and 50s, these strategies may help you catch up:

• Take advantage of retirement savings options. Hopefully, by your 40s and 50s, you're already utilizing available retirement vehicles such as a tax-advantaged IRA or 401(k). A 401(k) is an employer-sponsored retirement plan that is typically offered as part of an employee benefits package. An IRA, on the other hand, is available to all individuals, regardless of employment status.
  
  Tax-advantaged retirement plans can help your retirement savings grow over time. A 401(k) may offer you the chance to save a part of each paycheck automatically and defer taxes until you're ready to withdraw the money later in life. What's more, many employers offer matching contributions for employees who have been with their company for a certain amount of time. With an IRA, you won't have the option of a matching contribution from your employer, but your savings can still benefit from tax-deferred growth.
   
• Open a high-yield savings account. For non-retirement funds, you might consider a high-yield savings account or a certificate of deposit (CD). With both of these savings options, you'll benefit from compound interest, meaning any interest you earn on the account is applied to your principal savings balance. As a result, your interest earns interest, and your funds can grow more quickly than they would in another type of account.
   
• Try automatic deposits. Reduce the temptation to spend and maximize your savings by sending a percentage of your paycheck directly into your savings account.
   
• Track your finances. There's no understating the importance of a monthly budget, including your monthly after-tax income and expenses. Make note of any unnecessary spending and look for places to cut back. For maximum impact, take the funds you've freed up and redirect them into your savings account.
   
• Pay off old debt and avoid new debt. Debt can chip away at your ability to save by eating up funds that could otherwise go toward your long-term financial goals. If you're struggling with significant debt, it may be a good idea to pay down some of what you owe before trying to save money. Once you've paid off old debt, you'll have more room in your monthly budget to divert toward saving. Moving forward, keep loans and credit card purchases to a minimum. That way, extra funds can instead go straight to your savings goals.
   

If you're worried that you're not saving enough money in your 40s and 50s, don't panic. Ultimately, there's no one-size-fits-all solution, and your ability to save will vary based on your income, lifestyle and other factors. Do your best to identify your unique goals and regularly contribute to your savings so that you can achieve your financial goals and make the most of your retirement.