Comfortable in retirement

How much should I have in my 401(k) at age 40?

Question: I’m 40 and have $75,000 in my 401(k). Am I on track to retire comfortably?

Answer: The short answer is it depends what you mean by “comfortably.”

The longer answer is that it isn’t as much about hitting a specific dollar amount as it is about being able to replace enough of your income to maintain your standard of living.

Experts generally suggest that you’ll need about 80% of your salary after retirement to avoid sacrificing your lifestyle. This isn’t a perfect rule — after all, if you’re used to living a frugal, savings-oriented lifestyle, you could probably retire comfortably on less. However, it is a good starting point.

Social Security is designed to replace about 40% of the average worker’s income, so this means that unless you have a pension or other guaranteed income stream, the other 40% will need to come from your savings.

I’ll spare you the math, but for the typical retiree, this means that you’ll need roughly 10 times your salary at the time of your retirement.

In order to attain this, Fidelity suggests you focus on achieving certain benchmarks. At 30, you should have half of your annual salary saved. By 40, you should have twice your salary, and by 50, you should aim for about four times your salary in retirement savings.

The bottom line is that at 40, if $75,000 represents twice your salary, you’re in good shape. If not, you may want to start playing catch-up.