How much money is enough at 40?
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.
Retiring at 40 with $2 million is possible, though it is a lofty goal, especially if you don't have a large inheritance or some other windfall. But it can be done if your income is high sufficient and if you are aggressive with your savings strategy.
Age by decade | Average net worth | Median net worth |
---|---|---|
30s | $277,788 | $34,691 |
40s | $713,796 | $126,881 |
50s | $1,310,775 | $292,085 |
60s | $1,634,724 | $454,489 |
With $10 million on hand, you can comfortably retire at age 40. Here are a few things to consider as you make your own plans but you may want to work with a financial advisor to make sure you have the plan you need to live the lifestyle you want. Retirement ultimately boils down to two numbers: Money in and money out.
Depending on your goals and plans, $3 million can be enough to cover early retirement at 40. However, certain factors will affect whether $3 million is enough. For example, your retirement needs and life expectancy play a big role. Here's how to invest it to cover healthcare, housing and lifestyle.
There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more.
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
Age Range | Account Balance |
---|---|
Under age 35 | $11,250 |
Ages 35-44 | $27,910 |
Ages 45-54 | $48,200 |
Ages 55-64 | $57,670 |
The average retirement savings a person should have at age 40 varies significantly depending on individual circ*mstances, financial goals, and income levels. Many financial experts suggest you should have 3 times your yearly pre-tax salary saved by 40 years old.
The value of the $1 million today is the value of $1 million discounted at the inflation rate of 3.2% for 40 years, i.e., 1 , 000 , 000 ( 1 + 3.2 % ) 40 = 283 , 669.15.
How long will $1 million last in retirement?
How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.
Retirement age | Length of time covered by the $200k (assuming a life expectancy of 80 years) | Maximum annual and monthly distributions |
---|---|---|
60 | 20 years | $10,000 annually, $833 monthly |
65 | 15 years | $13,333 annually, $1,111 monthly |
70 | Ten years | $20,000 annually, $1,667 monthly |
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit. You get less than your full benefit if you file before your full retirement age.
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.
What Is the Best Age to Open a Roth IRA? The earlier you start a Roth IRA, the better. There is no age limit for contributing funds, but there is an age limit for when you can start withdrawals.
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
According to Schwab's 2023 Modern Wealth Survey, Americans perceive an average net worth of $2.2 million as wealthy. Knight Frank's research indicates that a net worth of $4.4 million is required to be in the top 1% in America, a figure much higher than in countries like Japan, the U.K. and Australia.
Yes, it is possible to retire with $1 million. Retiring at the age of 65 with $1 million can seem like a lot of money to a lot of retirees. But the truth is, that amount depends entirely on your household, your finances and your needs.
What is the average and median retirement savings? The average retirement savings for all families is $333,940 according to the 2022 Survey of Consumer Finances.
How many 401k millionaires are there?
Fidelity also reported that the number of 401(k) accounts with balances of at least $1 million rose in the fourth quarter by 20%, to 422,000 accounts; and by 41% for the whole year.
Financial planners often recommend replacing about 80% of your pre-retirement income to sustain the same lifestyle after you retire. This means that, if you earn $100,000 per year, you'd aim for at least $80,000 of income (in today's dollars) in retirement.
As of May 2023, more than 1 in 5 Americans have no emergency savings. Nearly one in three (30 percent) people in 2023 had some emergency savings, but not enough to cover three months of expenses. This is up from 27 percent of people in 2022. Note: Not all percentages total 100 due to rounding.
A majority, 65%, say they live paycheck to paycheck, according to CNBC and SurveyMonkey's recent Your Money International Financial Security Survey, which polled 498 U.S. adults. That's a slight increase from last year's results, which found that 58% of Americans considered themselves to be living paycheck to paycheck.
Household wealth or net worth is the value of assets owned by every member of the household minus their debt. The terms are used interchangeably in this report. Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more.
References
- https://www.capitaltopics.com/blogue/is-100-stocks-really-the-best-option-for-your-portfolio
- https://www.fool.com/retirement/strategies/asset-allocation-by-age/
- https://www.loqbox.com/en-gb/blog/70-20-10-rule-for-money-budgets-as-seen-on-tiktok
- https://www.pewresearch.org/2023/12/04/the-assets-households-own-and-the-debts-they-carry/
- https://time.com/personal-finance/article/how-many-stocks-should-i-own/
- https://finance.yahoo.com/news/much-interest-earn-1-million-150000229.html
- https://finance.yahoo.com/news/income-level-considered-rich-140003986.html
- https://apnews.com/buyline-personal-finance/article/what-to-do-when-the-stock-market-crashes
- https://finance.yahoo.com/news/7-things-must-start-making-173436243.html
- https://ndvr.com/journal/how-many-stocks-should-you-own
- https://www.moneyworks4me.com/about-stock-market/investment-basics/first-golden-rule
- https://www.bankrate.com/investing/golden-rules-of-investing/
- https://www.quora.com/How-many-people-have-3-000-000-in-savings-in-the-USA
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-what-happens-when-you-buy-too-many-stocks/
- https://www.composer.trade/learn/what-is-a-90-10-portfolio-strategy
- https://foolwealth.com/insights/are-you-in-the-top-3-of-retirees
- https://www.mymcmedia.org/blog-strategic-financial-planning-tips-to-thrive-in-your-40s/
- https://localfirstbank.com/article/how-much-money-should-i-have-saved-by-the-time-i-am-30/
- https://www.bankrate.com/banking/savings/emergency-savings-report/
- https://www.barrons.com/articles/warren-buffett-berkshire-hathaway-bonds-stocks-3f3058b6
- https://www.investopedia.com/articles/personal-finance/040315/when-not-open-roth-ira.asp
- https://www.citizensbank.com/learning/50-30-20-budget.aspx
- https://www.investopedia.com/ask/answers/05/optimalportfoliosize.asp
- https://www.empower.com/the-currency/life/average-net-worth-by-age
- https://behindthebalancesheet.com/blog/does-your-portfolio-have-too-many-stocks/
- https://www.moneyshow.com/articles/daytraders-28139/
- https://www.investing.com/academy/trading/warren-buffett-investment-strategy-rules-fortune/
- https://www.investors.com/how-to-invest/investors-corner/how-to-build-long-term-profits-in-stocks-take-many-gains-at-20-25/
- https://www.unfcu.org/financial-wellness/50-30-20-rule/
- https://finance.yahoo.com/news/3-million-enough-retire-comfortably-130036875.html
- https://www.investopedia.com/financial-edge/0210/rules-that-warren-buffett-lives-by.aspx
- https://www.marketwatch.com/picks/this-is-warren-buffetts-first-rule-about-investing-heres-what-to-do-if-your-financial-adviser-breaks-that-rule-01635799738
- https://greenamerica.org/beginners-guide-buying-stocks
- https://www.fool.com/the-ascent/buying-stocks/articles/starting-to-invest-in-2024-heres-how-much-youll-need-to-become-a-millionaire-in-30-years/
- https://finance.yahoo.com/news/wealthy-net-worth-considered-poor-190014440.html
- https://www.nerdwallet.com/article/investing/investing-in-30s
- https://finance.yahoo.com/news/retire-40-2-million-140007867.html
- https://money.usnews.com/money/retirement/iras/articles/how-to-invest-for-retirement
- https://finance.yahoo.com/news/retire-comfortably-65-1-million-130047104.html
- https://www.voya.com/blog/7-easy-ways-to-start-investing-little-money
- https://smartasset.com/investing/pros-and-cons-of-stocks
- https://www.tsinetwork.ca/daily-advice/wealth-management/how-many-stocks-should-i-own/
- https://www.investopedia.com/articles/personal-finance/121815/buffetts-9010-asset-allocation-sound.asp
- https://www.unbiased.com/discover/retirement/can-you-retire-on-200k
- https://www.financialsamurai.com/what-percent-of-americans-own-stocks/
- https://wealthyhood.com/uk/blog/investing/how-to-invest-1000-pounds/
- https://www.schwab.com/retirement-portfolio
- https://www.fool.com/investing/2022/03/01/is-there-such-a-thing-as-owning-too-many-stocks/
- https://www.fool.com/the-ascent/buying-stocks/articles/will-investing-100-a-month-really-make-a-difference-in-your-net-worth/
- https://talkmarkets.com/content/how-much-money-do-i-need-to-invest-to-make-3000-a-month?post=431352
- https://www.globalatlantic.com/professionals/thriving-practice/market-insights/rule-120
- https://finance.yahoo.com/news/warren-buffett-reveals-instructions-invest-163624653.html
- https://finance.yahoo.com/news/much-money-stock-market-age-150008787.html
- https://www.cnbc.com/2023/06/30/jim-cramers-guide-to-investing-dont-own-too-many-stocks.html
- https://www.linkedin.com/pulse/warren-buffetts-5-golden-rules-your-blueprint-investment-brad-wiens-64fhc
- https://simpleprogrammer.com/creating-value-wealth-the-7030-rule/
- https://www.cnbc.com/select/why-you-shouldnt-avoid-investing-with-a-small-amount-of-money/
- https://www.quora.com/Is-it-advisable-to-invest-in-the-stock-market-if-you-have-only-50-or-100-dollars
- https://www.stash.com/learn/how-to-invest-1000-dollars/
- https://russellinvestments.com/-/media/files/nz/insights/four-golden-rules-of-active-management-game.pdf
- https://www.fool.com/retirement/how-much-do-i-need/
- https://www.thrivent.com/insights/retirement-planning/how-to-retire-with-no-savings
- https://www.myhubble.money/blog/the-40-30-20-10-rule-to-saving-and-spending-money
- https://fundingsouq.com/ae/en/blog/what-happens-to-50k-over-20-years/
- https://tools.carboncollective.co/future-value/1000-in-20-years/
- https://www.fool.com/investing/2024/04/22/want-decades-of-passive-income-3-stocks-to-buy-now/
- https://www.usatoday.com/money/blueprint/investing/warren-buffett-berkshire-hathaway-portfolio/
- https://www.investopedia.com/articles/financial-advisors/072915/what-does-ideal-retirement-portfolio-look.asp
- https://www.visionretirement.com/articles/largestexpensesretirees
- https://finance.yahoo.com/news/long-10-million-last-retire-130029886.html
- https://www.theinvestorspodcast.com/legend-investors-stock-portfolio/bill-gates-stock-portfolio/
- https://finance.yahoo.com/news/warren-buffetts-no-1-investing-132715262.html
- https://www.nerdwallet.com/calculator/compound-interest-calculator
- https://finance.yahoo.com/news/live-1-000-per-month-200011859.html
- https://www.investopedia.com/articles/stocks/07/100_equities.asp
- https://www.fool.com/research/how-many-americans-own-stock/
- https://www.synchronybank.com/blog/median-retirement-savings-by-age/
- https://eringobler.com/80-20-rule/
- https://www.frontlinefinancialsvc.com/The-70-30-Rule.9.htm
- https://www.fool.com/the-ascent/buying-stocks/articles/how-much-money-will-you-end-up-with-if-you-invest-1-a-day/
- https://www.hola.com/us/lifestyle/20231228354149/warren-buffetts-ten-rules-for-success/
- https://www.quora.com/Is-it-advisable-for-individual-investors-to-own-30-or-more-stocks-in-their-portfolio
- https://bestretirementportfolio.com/simulation/us-stocks-bonds-70-30/
- https://smartasset.com/investing/6040-vs-7030-asset-allocation
- https://www.fool.com/retirement/2017/06/18/should-the-average-american-invest-in-stocks/
- https://www.usatoday.com/money/blueprint/investing/best-stocks-under-20/
- https://www.linkedin.com/pulse/warren-buffett-how-many-stocks-should-you-own-habeeb-mahmood
- https://homework.study.com/explanation/good-news-you-will-almost-certainly-be-a-millionaire-by-the-time-you-retire-in-40-years-bad-news-the-inflation-rate-over-your-lifetime-will-average-about-3-2-a-what-will-be-the-real-value-of-1-m.html
- https://www.citizensbank.com/learning/how-much-money-do-you-need-to-retire.aspx
- https://www.barclays.co.uk/smart-investor/news-and-research/stocks-and-shares/when-should-you-sell-shares/
- https://www.cnbc.com/2020/06/12/cramer-recommends-buying-these-17-cloud-stocks-based-on-the-rule-of-40.html
- https://smartasset.com/investing/asset-allocation-in-retirement-guide
- https://www.investopedia.com/terms/l/lot.asp
- https://www.sofi.com/learn/content/70-20-10-rule/
- https://www.cnbc.com/2024/04/09/most-of-americans-are-living-paycheck-to-paycheck-heres-why.html
- https://www.sofi.com/learn/content/how-many-stocks-should-i-own/
- https://www.cnn.com/2024/02/27/success/401k-balances-fidelity/index.html
- https://www.whittiertrust.com/stock-valuations-rule-of-20/
- https://www.fool.com/investing/how-to-invest/stocks/how-many-stocks-should-i-own/
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-how-much-money-you-could-have-if-you-invested-1000-a-month-for-20-years/
- https://money.usnews.com/investing/articles/best-stocks-to-buy-now-with-1000
- https://www.stash.com/learn/how-much-should-i-be-investing/
- https://smartasset.com/investing/7030-vs-8020-asset-allocation
- https://www.cbsnews.com/news/retirement-savings-million-dollars-stretch-money-analysis-gobankingrates-years/
- https://tools.carboncollective.co/future-value/3000-in-20-years/
- https://money.usnews.com/money/retirement/articles/how-can-i-earn-100-200-or-500-per-month-in-guaranteed-income-in-retirement
- https://www.fool.com/the-ascent/buying-stocks/articles/what-are-warren-buffetts-5-rules-of-investing-and-how-can-you-use-them-to-your-benefit/
- https://www.nerdwallet.com/article/investing/the-average-retirement-savings-by-age-and-why-you-need-more
- https://www.bankrate.com/investing/best-ways-to-invest-1000/
- https://www.equifax.com/personal/education/life-stages/articles/-/learn/how-much-should-i-have-saved-by-middle-age/
- https://fortune.com/recommends/investing/how-much-of-your-income-should-go-toward-investing/
- https://www.kiplinger.com/investing/stocks/warren-buffett-stocks-berkshire-hathaway-portfolio
- https://www.investors.com/how-to-invest/investors-corner/how-much-money-do-you-need-to-start-investing/
- https://smartasset.com/investing/how-to-make-500-a-month-in-passive-income
- https://www.reddit.com/r/TheMoneyGuy/comments/19fmhzg/new_paper_suggests_a_portfolio_of_100_stocks_is/
- https://cozinhacabral.com/20-10-rule-to-calculate-debt-limits/
- https://medium.com/@carolinamatoslven89/what-is-the-70-30-rule-and-how-does-this-savings-method-work-so-you-can-improve-your-finances-17615b6c4d5d
- https://www.investopedia.com/ask/answers/05/researchtradingcheap.asp