Saving for Retirement Starting at 40: The Math to 65

Starting at 40 leaves about 25 years until 65, which is enough time for growth to do most of the work. At an assumed 7% average return, $20,000 already saved plus $1,000 a month grows to about $924,580 by 65, and roughly two-thirds of that is growth rather than money you put in. The 2026 limits let you save far more than that if your budget allows: $24,500 in a 401(k) and $7,500 in an IRA, with larger catch-ups from age 50.

What 25 Years of Compounding Means

The Rule of 72 estimates how long money takes to double: divide 72 by the annual return. At 7%, that is 72 ÷ 7 ≈ 10.3 years (the exact figure is 10.24). Twenty-five years is room for about two and a half doublings: $1 invested at 7% for 25 years becomes 1.07²⁵ ≈ $5.43.

The flip side is that the last dollars you add have little time to grow. That is why what you contribute in your 40s carries so much weight, and why waiting another ten years is costly.

The 2026 Contribution Limits

One rule to plan for: starting in 2026, if your Social Security wages from an employer were over $150,000 in the prior year, your catch-up contributions at that employer must go in as Roth. The limits are indexed and usually rise, so check each year. Our 2026 401(k) limits guide has the per-paycheck amounts.

The Match Comes First

If your employer matches contributions, contribute at least enough to get the full match before anything else. It is money you don't get any other way, and it compounds for 25 years like the rest. Our employer match guide shows how people lose part of it by front-loading.

Contributions Move the Result More Than Returns

Using the same example, compare two changes over 25 years:

• Earn 8% instead of 7%: the balance at 65 rises by $173,250.
• Save $1,500 a month instead of $1,000: the balance rises by $405,036.

You can't choose your return, but you can choose your contribution. A raise, a paid-off car loan or a side income routed straight into the 401(k) usually does more than fine-tuning investments. Keeping a large share in stocks is common with a 25-year horizon because short-term drops have time to recover, but the right mix depends on how you would react to a large loss.

Where the Next Dollar Can Go

Once the match is covered, the choice is about which tax break each account gives. One simple order to consider:

1. The full employer match. It's the only step that adds money you didn't earn in salary.
2. An HSA, if you have an eligible high-deductible health plan. Contributions are deductible, and money used for medical costs comes out tax-free. See our HSA retirement guide.
3. An IRA, up to $7,500. It often has more investment choices and lower fees than a workplace plan, though income limits apply to Roth contributions and to deducting traditional ones when you have a workplace plan.
4. More 401(k), up to $24,500. Plus the catch-up once you turn 50.

If your 401(k) has low-cost index funds, going straight to the 401(k) limit is also reasonable. The order matters less than the total you save each month.

Check Your Progress Against Your Own Number

Balance-by-age benchmarks give a rough sense of where people stand; see our 401(k) balance by age guide. Your own target depends on your spending in retirement and your Social Security benefit, so it's worth running your numbers once a year rather than comparing yourself with averages.

What This Doesn't Cover

The example ignores taxes, fees, inflation, salary growth and the fact that contribution limits rise over time. It doesn't choose between Roth and traditional accounts (see our Roth vs. traditional guide) or address debt payoff. A fee-only financial planner can build a plan around your income, accounts and retirement date.

Sources

• IRS release IR-2025-111 (2026 401(k), IRA and catch-up limits)
• IRS Notice 2025-67 ($72,000 total limit, $150,000 Roth catch-up threshold)