How to Save for Retirement at 40

Everyone has a different journey when it comes to saving for retirement. Some start early with a job that offers 401(k) matching right out of school, while others get a later start. If you’re just starting to save for retirement in your 40s, taking certain steps now can help ensure your money is available when you retire. Here are six tips on how to start saving for retirement at 40. A financial advisor can also help you save and plan for retirement.

1. Take Advantage of Employer Matching

If you have an employer that offers 401(k) matching, it’d be foolish not to take full advantage of it. It’s free money. If your employer offers a matching contribution of up to 5%, and you’re contributing 15%, you’re actually saving 20% of your income for retirement. That means if you make $100,000, $20,000 a year is going into your 401(k) plan, but you’re only putting in $15,000, with $5,000 coming from your employer.

2. Pay Off Your High-Interest Debt

According to Experian, the average millennial (born between 1981 and 1996) carries $6,642 in credit card debt. Interest rates on credit cards currently average around 20%. Using our credit card payoff calculator, it would take you until 2055 to pay off $6,642 by making the minimum payment. You’ll pay over $33,000 in total interest, and that’s assuming you don’t accrue any more debt.

It’s going to be hard to save enough for retirement if you’re carrying around credit card debt. Auto loans, personal loans and even some student loans may come with high-interest rates, too. For you to start leaning hard into saving for retirement, you need to eliminate this high-interest debt. Addressing the spending habits that led to this debt is also crucial. Saving for retirement is hard because it’s an exercise in delayed gratification. But if you’re living within your means, you’ll have an easier time doing it.

3. Invest 15% to 20% of Your Income in Your Retirement

If you’re wondering how to start saving for retirement at 40, this is it. You’ll need to contribute at least 15% to 20% of your income to a retirement account.The sooner you start saving, the better your financial future will be. Remember that you’re starting later in life, which means that you can’t depend on your 401(k) compounding the same way it would have if you started in your 20s.

The good news is that hopefully, you’re making more money than you were in your 20s. That means you can make up ground. If you can cut your expenses and prioritize saving for retirement, you can build your savings and make retirement a reality.

For example, say you earn $100,000 per year at age 40 and start saving 15% of your salary in a 401(k), plus a 3% employer match. By the time you turn 65, your 401(k) could be worth over $1.2 million if it grows by an average of 5% per year. And that’s assuming you don’t increase your annual contributions, which would also boost your total savings.

4. Invest in IRAs

Say you’ve been stashing away money in your 401(k) and hit your contribution limit ($23,500 in 2025). That doesn’t mean you should stop saving. Consider opening an individual retirement account (IRA). Traditional IRA and a Roth IRAs both have a $7,000 contribution limit in 2025.

The main difference between a traditional and Roth IRA is how they’re taxed. A traditional IRA uses pre-tax money, much like your 401(k). Contributions to it are tax-deductible, but you’ll need to pay income tax on withdrawals. A Roth IRA is funded with after-tax money. While contributions aren’t tax-deductible, the money grows tax-free and can be withdrawn tax-free in retirement.

5. Save or Invest Unexpected Cash

If you come into a lump sum of money – such as a work bonus or an inheritance – consider adding to your retirement savings. While it can be tempting to splurge on a vacation or buy something for yourself, the money is better used to invest in your future.

If you don’t want to put the money toward your retirement, consider other investments you could make with it. For example, if you have a large amount of money, you could use it as a down payment on some real estate. Whether it’s a primary residence, vacation home or investment property, owning an appreciating asset can provide financial stability in retirement.

6. Prioritize Yourself

If you and your spouse plan to retire together, prioritizing your savings over expenses like your children’s college fund or wedding is crucial. If you and/or your spouse want to retire together, you need to make it a priority. Especially if you’re starting to save for retirement at 40, you don’t have as much time. Your kids will have opportunities in the future to save, pay off their tuition and save for their own retirement.

Bottom Line

If you’re wondering how to start saving for retirement at 40, there’s no magic formula. Pay off your credit cards, don’t accrue unnecessary expenses and start stashing as much money away. If your employer offers a 401(k) match, take full advantage of it. If you can, max out your 401(k) contributions and save in IRAs too.

Starting late doesn’t mean saving is pointless; even small contributions can significantly impact your retirement. In 25 years, you’ll thank your past self for having the foresight to invest in your retirement. Even if you won’t be able to fully retire, having the financial cushion to slow down will do wonders for your well-being.

Tips for Saving for Retirement at 40

A financial advisor can help you save and invest your money for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When planning for retirement, you need to estimate how much you’ll need to retire comfortably. Use our free calculator to get a reliable estimate, accounting for your income, inflation and your location. Also, our Social Security calculator will help you estimate how much you can expect to receive from the government each year.