Personal Finance

I make $80k a year and I'm being told by age 40 you should have 3x your salary saved in your 401k and I'm nowhere near that - is it panic time?

Christy Bieber

Published: January 20, 2025 1:06 pm

When you are deciding how much to save for retirement, there are lots of rules of thumb that you’ll read or hear. One of those rules says that you should have three times your salary saved by age 40.

You’ll see this number in most online recommendations and it’s based on the premise that your ultimate goal is to have 10 times your income saved up by age 67, which is the full retirement age for  Social Security for younger workers born in 1960 or later.

One Reddit user has seen this general rule, and he’s concerned because his retirement account balance is nowhere near that number. The original poster (OP) said he makes $80K, has $140K saved, and has a 4% company match. He also contributes 11% to his 401(k) and he started saving just 10 years ago.

If he followed the “rule” and had three times his salary saved, he would have $240k  right now, so he’s about $100,000 behind and is wondering if it’s panic time. So, should he be worried? 

Is the Reddit user behind on retirement savings?

The first big question is whether the Reddit user is behind on his retirement savings efforts and whether he should be concerned about his current balance. Of course, based on the commonly-cited guidelines he is, but let’s take a look at what he’s contributing and where he needs to end up. 

If the OP:

• Starts with $140K invested at age 40
• Contributes 11% of his income throughout his career
• Gets a matching contribution equal to 4% of his salary
• Makes $80K a year
• Earns 7% returns
• Gets a 2% salary increase each year

He will end up with around $1,992,207 at age 67. At a safe 3.7% withdrawal rate, that would provide about $73,711.66 in annual income. 

By that time the OP will be making around $136,550.92 assuming a 2% annual raise. If he wants to replace about 80% of that amount — which is what most experts recommend — he’d need a total income of around $109,240.73. 

Now, it may seem like he’ll be short but he also has Social Security to help support him  Retirement benefits replace around 40% of pre-retirement income. With his savings replacing around 54% to add to that 40% provided by  Social Security, he’d be in good shape. 

Don’t follow rules of thumb– make your personalized plan

While the OP may be behind now, he’s still likely on track to have a pretty secure retirement. That’s because he’s now saving a good amount of his income — around 15% including the employer matching contribution.  

His generous savings rate, plus the power of compound interest will help his account balance grow substantially before retirement. So, there’s no reason for him to panic about being a little bit behind now. He’s going to have far more than most retirees do at age 67. 

This Redditor’s example shows the problem with general rules. You can’t make decisions about your retirement based on generic online advice since your own situation may be very different from the typical workers. The best and only way to make sure you’re making the right choices for you is to get personalized help from a financial advisor.

Your advisor can work with you to decide how much you should save given your salary, 401(k) match, target retirement date, and more. With professional help, you can get yourself on the path to a secure future — with no panicking required just because you seem to fall behind some metric published on the Internet.