Retirement Retirement Planning

How Much Should You Have in Your 401(k) at 40? The Average Balance Might Concern You

Are you on track or are you falling behind?

By Catherine Collins , Edited by Laura Hohenstein

Updated May 26, 2026

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Many people in their 40s are members of Generation X, which is the first generation to have access to 401(k)s for the entirety of their working careers. However, many people in their 40s are currently behind on retirement savings.

A study by Fidelity said that people should aim to have three times their income in their retirement plans by the time they're 40. Most workers today, though, fall short of this guideline in their 401(k)s.

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The average 401(k) balance for workers in their 40s

The average 401(k) balance for workers in their 40s is $409,686, according to Empower data. However, this number is often brought up by those who are in the higher income categories. Most workers in their 40s are more closely aligned with the median 401(k) balance, which is $156,675.

The median balance is more concerning because Gen X projects they will need $1.1 million to retire comfortably. However, most are currently on track to save an average of $700,000. That means that there is a $400,000 deficit for many people who are in their 40s.

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Those in their 40s are juggling multiple financial priorities

Part of the reason that many people in their 40s are behind on retirement savings is that they are juggling multiple financial priorities. For example, one study from the CFP Board found that members of Gen X wished they had saved more in their retirement accounts and also for other life milestones, such as their children's college education, homeownership, and weddings.

Avoid the early cash out mistake when changing jobs

One mistake many people make is cashing out their 401(k) early. This happens often when people switch jobs. Many people do not understand their options when switching employers and therefore opt to cash out their 401(k).

If you are in your 40s, you will have to pay a 10% early withdrawal penalty. Additionally, 401(k) withdrawals are taxed at ordinary income, which could potentially put you in a higher tax bracket. Of course, these penalties are only a portion of the drawback of cashing out early. You can also lose significant investment gains over the long-term because you took your money out of the market.

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Take full advantage of your employer's match

Another important part of saving enough for retirement is taking advantage of your employer's 401(k) match. Every employer has a different policy regarding their match. Many people miss out on thousands of dollars of potential returns by not taking full advantage of their match. In addition to contributing enough to get your employer's match, familiarize yourself with your employer's vesting policy.

Some employers offer their employees immediate vesting opportunities, while others require that you work a specific number of years before you are fully vested. Because of that, many people leave their jobs and switch employers without realizing that they may be losing a portion of their 401(k) returns due to not being fully vested.

Increasing your contribution rate incrementally makes a difference

Even though it might not seem like a 1% change to your 401(k) contribution rate would make a difference, Vanguard found that those who decrease contributions by 1% can reduce their nest egg by up to $300,000 or more by the time they retire.

Those who increase their contributions by 1% annually at least can have thousands more in their nest egg by the time they retire. So, one way workers in their 40s can meet their retirement goals is to set up auto escalation for their 401(k) accounts if their employer offers it.

Other ways to maximize your retirement savings

There are a couple of other steps those in their 40s can take to maximize their retirement savings. Diversifying the types of retirement accounts you have can be beneficial for your retirement tax strategy in the future. Many financial experts recommend that people have a combination of 401(k)s, Roth IRAs, HSAs, and regular brokerage accounts as they head into retirement.

Finally, avoiding taking out 401(k) loans can help to preserve your portfolio. Even though you technically take out a 401(k) loan from yourself, the lost potential investment compounding can be substantial by the time you retire.

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Where 40 year olds can get advice on retirement planning

If you're not sure whether or not you're on track for retirement or you need advice about the best next steps to catch up on your investments, consult a financial planner. A financial advisor can review your 401(k) progress thus far, make recommendations on next steps, and help you create an investment strategy based on your goals and risk tolerance.

Bottom line

All workers deserve to have a stress-free retirement after decades in the workforce. However, if you're in your 40s and you're behind on your savings, now is the time to ramp up your investments so you don't have to delay your retirement. Fortunately, those in their 40s still have a long time horizon before their golden years, and with the right approach, they can hopefully invest enough to retire comfortably.

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