How Much Should I Have Saved by 40?

How much should you have saved by 40? It’s one of those money questions that practically begs for a simple answer. Three times your salary. Check the box. Move on. Except your financial life does not work that way. In this episode of She’s Talkin’ Money, I’m breaking down why common age-based savings benchmarks can be useful as a starting point — but completely misleading when they’re treated like a verdict on whether you’re doing well or falling behind. Because someone who earned $75,000 for most of her career and just started making $150,000 should not suddenly feel like a financial failure because her “target” doubled overnight. And having $300,000 saved does not tell me nearly enough to know whether you’re actually on track. We’re talking about what matters more than an arbitrary savings multiple, including your desired retirement age, what you expect retirement to cost, whether your money is Roth or pre-tax, your debt, your liquidity, your future goals, and how much you’re consistently saving today. I’ll also explain why the question “How much should I have saved?” is often really asking something deeper: Am I okay? Am I behind? Did I wait too long? Can I still catch up? Is everyone else doing better than me? The answer is not another random benchmark. It’s having a plan. In this episode, you’ll learn: why the popular “3x your salary by 40” rule can create unnecessary panic how a major income increase can make traditional benchmarks especially misleading why $300,000 in Roth money is not the same as $300,000 in pre-tax retirement money what actually makes me concerned when someone reaches 40 why your retirement age and future spending matter more than a generic savings target how I think about saving roughly 20% of take-home pay with my clients why automating your savings matters more than obsessing over one perfect number and the questions you should ask instead of simply wondering whether you’re ahead or behind There is no magic amount you need to have saved by 40. The better question is whether your money is actually moving you toward the life you want. If you’re ready for personalized, judgment-free financial guidance, learn more about working with Shari. Shari Rash is the founder of GWA Wealth, a virtual advisory firm helping women make confident, values-aligned decisions with their money. Visit GWA Wealth to explore your next step. Shari Rash is a financial planner and Investment Adviser Representative of GWA Wealth, a Registered Investment Adviser. This podcast is for educational purposes only and is not personalized investment, tax, or legal advice. Nothing discussed should be considered a recommendation, and listening does not create an advisory relationship. Investing involves risk, including possible loss of principal. Please consult your own financial, tax, or legal professional before making decisions based on your individual circumstances. Learn more about your ad choices. Visit megaphone.fm/adchoices

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• 1:24Speaker 03

  Hey, everyone. Welcome back to She's Talking Money. Today, we are going to answer the question, how much should I have saved by 40? This time last year, I was recording my three-part series of 40 Money Lessons by 40. I was turning 40 years old and I decided to share with you all some things I've learned over the 20 years or so that I've been in financial services. Well, my 41st birthday is quickly approaching and I thought, well, let's pay homage to 40 again.

• 2:07Speaker 03

  But this is a question I think a lot of people ask, and it's certainly a headline. Like, if you see, you should have X amount by 40, this amount by 50. Those articles always catch people's attention. And if you're here because the title of this episode caught your attention, welcome. And I find that people love this question because they want an instant answer. It's like instant gratification. It's like an instant benchmark. Okay, I'm on pace. I'm behind. And then insert whatever emotion comes with the determination

• 2:51Speaker 03

  of where you are in comparison to this number that the article gave you, for example.

• 3:02Speaker 03

  So like a popular, this is where you should be by 40, is you should have three times your salary saved by 40. And a lot of people go, okay, great, I have that. Check the box, done. Move on to the next thing, right? Or other people may be like, oh, my gosh, I'm nowhere near that. I'm so behind and kind of freak out.

• 3:27Speaker 03

  But the problem with that, the three times your salary or the X times your salary is how much you should have saved? Is it's not that simple. And my immediate response is, you know, when someone asks, well, how much should I have saved? Or do I not have enough saved? It's compared to what? Compared to the person who has made $150,000 since they were 25 years old? Compared to someone who just went from $75,000 to $150,000 in the last year? Compared to someone retiring at 55? Compared to someone retiring at 67?

• 4:10Speaker 03

  Compared to someone who wants to spend 60 grand a year in retirement versus $150,000 in retirement? That one number cannot answer all of these questions. But we like the quick answer. We want that 3X, your salary is how much you should have saved. So you can be like, check, did it? Let me move on with my life so I don't have to worry about my money or think about my money. But we have to dig a little bit deeper because if we've learned anything by now is that money is not that simple. Just throwing a number out there is not that simple. Or asking a, what is a simple question?

• 4:55Speaker 03

  You should not get a simple response when it comes to your money. I, I like benchmarks. I think they're helpful. Like, like most things when it comes to your money, it provides the mathematics behind it. But then there's always the emotion, the additional questions, the qualifications. And that's where we have to look at benchmarks as a starting point, a rough frame of reference. But benchmarks work because it gives us the instant gratification. And the headlines know that, right? The people writing the headlines know the reader wants instant gratification.

• 5:40Speaker 03

  How much you have, you should have saved by 40 gets clicked because it promises certainty. It promises an answer. But certainty is exactly what the benchmark cannot give you. So let's talk about some of the flaws when it comes to just using 3X your salary, three times your salary.

• 6:07Speaker 03

  One, salary changes. So this is one of the strongest examples. Suppose you made $75,000 for most of your career, made $75,000 a year. Then at 38, 39, 40, you get promoted. You, you switch industries, something life-changing happens, and now your salary's doubled and you make $150,000. If someone tells you you should have three times your income at age 40 saved, and suddenly your target jumps from $225,000 to $450,000?

• 6:49Speaker 03

  Did finance, did your finances suddenly become worse overnight? Because you're now not hitting this benchmark? No, you got a raise. So like, that's the backstory behind it, right? The benchmark moved faster than your actual life could, your actual financial life could. That doesn't mean you're behind. It just means that benchmark was, is simplistic. It's just a starting point. It's just a frame of reference. And so now, now, this is what matters now. If you got that raise, right? Say your income doubled or your income went up by 50%

• 7:32Speaker 03

  and you got that life-changing amount of money.

• 7:37Speaker 03

  Now that you're making more, how much of that raise are you actually saving? How much lifestyle creep are you allowing? Did your lifestyle double the way your income doubled? Right? That's, that's what we need to keep in check. Let's maximize. Let's take this windfall that has, has happened to you, which is amazing and awesome, and you deserve it. And let's increase our investing. Let's increase our savings. Can we use this higher income period to make up for the years where you had less capacity to save?

• 8:21Speaker 03

  Maybe when you were making $75,000 a year, you were able to save, I'm making this up, $1,000 a month, right? And that was like it. Like you felt like you were living very modestly, but you were, obviously saving was important. You were able to save $1,000 a month, which is fantastic and wonderful, right? Well, now that you are making double that, using my example, can we save a good chunk of this extra income that you have coming to you? That is what is productive. That's a way to look at the benchmark and go, okay, not beat ourselves up for, well, I should be at 400-some-thousand

• 9:05Speaker 03

  because that's three times my income. No, look at where you came from and look at where you are today and say, okay, how can I take this additional income and start saving more? You know, maybe increase your lifestyle slightly, right? We want to enjoy the fruits of our labor, but we also want to make sure that we are saving for future self. We should not feel terrible that you do not have $450,000 saved based on this benchmark just because you started making 150 grand a year ago, right? That money is brand new to you. There are some asterisks next to the amount we've saved

• 9:50Speaker 03

  because maybe you were saving at that point in time as much as you possibly could. And we shouldn't be made to feel bad about it. So we're using the benchmark as a starting point, a frame of reference, but then we're bringing it back to real life. But then, what's important though, is that if you have had an increase in income over the past couple of years, let's make sure that we're using as much of that as we possibly can of that increase and saving that for the future.

• 10:23Speaker 03

  So if, if a 40-year-old woman came to me and she had $300,000 saved, I am not immediately saying, you're behind, right? It's just, they're just, these are just numbers. Like, these are just facts being thrown at me, right? I want context. Are you actively contributing to your investment accounts? How much are you saving? Here's a big one. Is your money Roth or pre-tax? If someone came to me with $300,000 saved in a Roth, that is a very different dollar amount than $300, $300,000 saved pre-tax.

• 11:09Speaker 03

  $300,000 saved in a Roth is more like $450,000 saved pre-tax. Because that pre-tax money, 20-some percent of it at least, has an IOU on it to the government. Depending on, obviously, the state you live, the tax bracket you're in, all of that stuff. But that pre-tax money has an IOU on it for, you know, we can maybe plan for 20% to a third is going to the government. So if you have pre-tax money saved, you need more of it in retirement, or you need more of it saved to net out the same amount that a Roth gets you after tax.

• 11:53Speaker 03

  So that's a very big difference. And again, those articles, you should have X amount saved by 40. They don't explain that to you. They don't tell that to you. They don't tell you what types of dollars are potentially more powerful and are tax-free in the future. They just tell you a dollar amount. I also want to know, again, if a 40-year-old woman's coming to me with $300,000 saved and asking me, "Am I behind? Am I on track?" I want to know what other investments do you have? What's your cash situation? What debt do you have? Right? Because debt has just as much of an impact on net worth, if sometimes more of an impact on net worth,

• 12:37Speaker 03

  depending on the interest rate, versus the money you have saved. Right? So you could have a million dollars at 40 years old saved, but if you have $500,000 in student loans, credit card bills, car loans, all of that, that million dollars is not a true $1 million. It is, but as far as your overall net worth goes, the debt cancels out half of that. What are your future goals? What are we trying to achieve here? Like, money is a means for us to achieve our goals. So what are we trying to do? Saving for retirement is obviously a big goal for most people. Well, when is your retirement? Are you looking to move?

• 13:22Speaker 03

  Do you want to buy a second home? Like, pay for your children's college? Like, what are we saving for? Taking a sabbatical, changing careers? All of these things are essential to factor in before I say, "Yes or no, you have enough money," or "Don," or "You're on track." Also, what do you think your retirement is going to look like? Paint me a picture of your retirement. Is it maybe taking a step back? Not having as high-pressure a job? When you are 50-some years old, still earning an income, but starting to wind down, starting to chill out?

• 14:03Speaker 03

  Is it starting your own consulting business and earning an income that way? Opening up a different business and taking on debt because you're opening up a business? Traveling? You want to sell everything and live on a boat? Like, what do we want to do in retirement? So $300,000 saved is not always $300,000 saved. As I mentioned before, $300,000 in a Roth account is very different than $300,000 in a traditional pre-tax account because of the tax treatment of that money. Also, $300,000 saved when you have $200,000 of debt.

• 14:45Speaker 03

  Again, you have the 300 saved, but you still have that debt hanging around. So, again, $300,000 does not equal $300,000. So the context matters. Just making a blanket statement of saying you need X amount of dollars saved by this age is incomplete advice. And again, this is where financial planning comes into play. This is where we need to look at your entire situation. Everything going on. Money in, money out, your assets, what you own, your liabilities, what you owe. Your assets minus your liabilities equal your net worth. You could have a million dollars in investments but have negative net worth.

• 15:30Speaker 03

  Like, that is a very real thing. What you have saved or your investments is just one slice of the pie. So we are working through these things, and we're answering these questions. And think about this for yourself as you're thinking about your scenario.

• 15:49Speaker 03

  What are some of your goals? What do you want to achieve? What do you want your retirement to look like? What are you saving for? If you want to retire at 55, that's a very different plan than someone that wants to retire at 67. If you think you're going to need $60,000 in retirement, that's a very different savings goal and savings plan compared to someone that expects to need $200,000 in retirement. Right? So that's where we dig deeper, too. And I say this to my clients all the time.

• 16:32Speaker 03

  The conversations will start usually when they hit 50. Like, "Okay, Shari, how much do I need to have saved for retirement?" And I can't tell them that until we answer a lot more questions. And one is, one, when are you going to? When do you think you're going to retire? But two, what is your retirement going to look like? Are you going to have other income coming in? What's your lifestyle going to be? What are we spending now? Can we expect that that's what we're going to be spending in retirement? Because a million dollars for one person in retirement may be plenty of money, plus some. Maybe enough for one person. A million dollars for someone else may not nearly be enough.

• 17:15Speaker 03

  So we need to look deeper. We need to dig a little bit deeper with these questions and just not expect the black-and-white yes-or-no answer.

• 17:27Speaker 03

  Retirement age is super important when we're saving for retirement. Again, the dollar amount is a goal, but it shouldn't be the end-all, be-all. It's what is your retirement going to look like?

• 17:44Speaker 00

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration blog, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies. 18+,.

• 18:12Speaker 03

  So now that we've talked about the numbers and how there's more to the number than the actual number, and there's a lot of factors to consider,

• 18:25Speaker 03

  there still is the reality of, you may be behind. You may not be "on track," quote-unquote. So let's, instead of slapping labels to it, let's just talk through where I get concerned if I'm sitting down, speaking with someone. I get concerned when a 40-year-old is sitting in front of me. They have no retirement savings. They have no liquidity. And most importantly, they have no ability to save. That is much more meaningful than missing some salary multiple,

• 19:08Speaker 03

  you know, being at two times your income versus three times. If someone has not accumulated much yet, but they earn well, they have positive cash flow, they can save on paper, and is willing to build a plan, that is very different from someone who has no assets and no room in their budget to start saving.

• 19:33Speaker 03

  When I work with clients, I like to see about 20% of your take-home pay going towards savings and/or investing. And if you're like, "Well, I'm contributing this much pre-tax or out of my paycheck to my retirement, so then that means I have a little bit less liquidity." That's fine. I'm not going to nitpick into separating every pre-tax dollar versus post-tax dollar. The bigger question is, are we consistently directing meaningful money toward the future?

• 20:16Speaker 03

  That's where we need to, that's what we need to think about. Not, you must have exactly $642,781.43 by age 40 in order to be on track. That's not helpful, but what is helpful is, do you have a meaningful savings habit? That is actually moving you toward your goals. There's a reason why, one, you clicked on this episode and you are interested in, how much money should I have saved by 40? Or there's a reason why you read the articles. You may not be actually looking for that number, right?

• 21:00Speaker 03

  You may not have said like, well, I need to know exactly the dollar amount I need to save. You may be instead wondering, am I okay? Did I screw this up? Am I behind? Is everyone else doing better than me? Because remember, we don't talk about money, right? So we just assume everyone else is doing better than, than we are and we're behind. So how am I doing versus my peers? Is it too late? Can I still catch up? Can I make up for lost time? Am I doing enough? Did I, I, I've heard this benchmark somewhere and, and now I need to know if I, I stack up to it.

• 21:40Speaker 03

  That's why the benchmark's attractive because it gives you a quick answer to an emotional question. But it may be the wrong answer. So again, we're not, I'm not saying here benchmarks are useless.

• 21:54Speaker 03

  But never let the benchmark be the verdict. We can look at it. We can use it as a rough reference point, but it does not tell you whether your plan works. If you hit the benchmark, if you join the episode today and I started the episode by giving that benchmark, giving that number and you hit it and you're like, I'm on track. What does that get you? Does anything change about your life? Are you going to do anything differently? Are you maybe going to ease up a little bit? So if we hit the benchmark, it's not as if you can wear a sticker around and say,

• 22:34Speaker 03

  I'm on track for retirement based on this benchmark I heard on She's Talkin Money. Right? Nothing changes. The better questions are, what are you saving now? What are you building toward? What do you, when do you want to stop working? What will retirement actually cost you? Are your contributions automated? Do you have a plan? Are you increasing your saving or debt reduction as your income increases?

• 23:09Speaker 03

  So what does on track actually mean? By 40, I care less about whether someone has hit some arbitrary multiple. And I care more about whether they have a plan in place and the automations to achieve it. So what is a plan? A savings target. Name a thing we're saving for and we have a dollar amount that we're saving for it. And we have a plan to hit it. Going on vacation, emergency fund, paying your car insurance every six months.

• 23:47Speaker 03

  Whatever it is, we have a savings target and we have a, a plan in order to hit it. I want to make sure you have automatic savings contribution. So money is being pulled from your checking account every month or every week to, to an investment account or to a savings account, to a sinking fund, whatever, to achieve that goal. I want to see automation, the less we have to think about things, the better. I was meeting with a client yesterday and we were going through all of her sinking funds and we were setting goals for them. And she had the habit of over saving in her sinking fund.

• 24:30Speaker 03

  So she has a brand new car, but she's still saving for a car fund. It's like, well, it's going to be a long time till you need a car. Do we need to keep on setting aside all this money into a car fund, into cash that's just sitting there not working for you? So having a plan of it. But then I said, you know, for the next three months, four months till the end of the year, here's where your, your automatic contributions are going to go. And then we're going to reevaluate. So this stuff isn't set in stone and we never think about it again. We set it, we, we let it go and then we review it and make adjustments. So we can change where our money is going at any point in time. The point is though, I want it automated.

• 25:14Speaker 03

  I want something automated in order, in order to achieve those goals. When I'm sitting down with my 40 year old clients, my 50 year old clients, again, I'm not looking as much as how much money they save, but what is your retirement age? You know, if, if a 40 year old's telling me she wants to retire at 55, yeah. Oh, we're going to have to get a lot more urgent with our savings. But if a 40 year old's saying, well, I want to, I want to work till 70. I love my job. I love what I do. I, you know, as long as I'm physically able to keep doing it, I'm going to keep doing it. Maybe I'll, I'll slow down a little bit, who knows? So what is your retirement age? How much do we think we're going to spend? What, what, what is our income now? What are we spending now?

• 25:58Speaker 03

  Obviously we're not going to know it down to the dollar. We may not even know it to the tens of thousands of dollars, but we need an idea of what your spending is going to be. Are you increasing your savings when your income goes up? If you're working overtime, if you get a bonus, what are we doing with that money? Are we diversifying our money across different account types and tax treatments? Is there liquidity outside of our retirement accounts? And how often are you reviewing this to make sure your plan still fits? All of those questions are much more useful to you than three times your salary. So again, you, you probably joined me today because we're talking about a benchmark of how much you should have saved by 40, but there's no magic number.

• 26:43Speaker 03

  The right amount is the amount that puts you on track for the life you are actually trying to fund. And if you're not there yet, that does not mean panic. It means now we have information and we need to make a plan.

• 26:57Speaker 03

  By 40, I care a whole lot less about whether you hit some arbitrary savings benchmark and a whole lot more about whether you know where you're going and you have a system in place to get there. So stop asking whether you're ahead or behind. Start asking whether your money is actually moving you toward the life you want. Thank you so much for listening and I'll see you next week.

• 27:22Speaker 01

  This episode is brought to you by State Farm. Football has a play for just about everything. You can go deep, keep it on the ground or draw up something nobody sees coming. And whether you want to run a flea flicker or the tush push, you need a plan to fit your unique situation. That's why State Farm takes the time to get to know you so they can help personalize coverage for your life and budget. Now that's a solid game plan. Like a good neighbor, State Farm is there.

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