I’m 40 with a $68,000 401(k). Am I doomed for retirement?

The Federal Reserve says the typical 40-year-old has $45,000 in retirement savings. So if you’re 40 with $68,000 in your 401(k), you’re technically ahead of the game compared to your peers.

But that doesn’t necessarily mean you’re in a good place as far as your savings go. And that’s what this Reddit poster is worried about.

Here, we have someone who’s about to turn 40 with $68,000 socked away in a 401(k) plan. They would like to retire at age 60 but would be okay with waiting until 62 if that’s more feasible. But given where they are in their savings journey, they’re wondering if their goal is even possible.

The reality is that $68,000 is not a ton of money to have saved by age 40. But things could also be a lot worse. And if there’s one thing this poster has going for them, it’s time.

It’s not too late to catch up

If the poster here were 55 years old with the goal of retiring at 60 or 62, I’d be pretty concerned about their $68,000 balance. But because the poster is only 40, I think their plan may still be more than realistic.

The reason? They still have plenty of time to contribute money toward retirement and boost their savings before their career comes to an end.

Let’s say the poster contributes another $750 a month to their 401(k) between now and age 60. Let’s also assume that their 401(k) plan generates an annual 8% return over the next 20 years, which is reasonable given that it’s below the stock market’s average.

In that case, based on their current $68,000 balance, the poster is looking at growing their 401(k) to about $777,000. And if they contribute $750 a month for an extra two years and wait until age 62 to tap their savings, they’ll be looking at around $930,000.

With a $930,000 balance, a 4% withdrawal rate (which experts commonly recommend) allows for about $37,000 of annual income.

Is that enough money to retire on? Well, it depends on what the poster wants to do with their senior years and what their personal expenses look like.

If they’ve got a paid-off home and are okay with a modest lifestyle, they may be fine — especially if they’re in line for a decent monthly benefit from Social Security. If they intend to stay in a high cost of living area, they may run into some problems.

Ways to boost savings ahead of retirement

The poster here has some catching up to do on their long-term savings. So it might help them to learn some tricks for boosting their 401(k) contributions.

One is to make sure they’re claiming their full workplace 401(k) match every year. Another may be to job-hop a bit, since switching jobs can sometimes lead to higher pay faster than climbing the ladder internally.

The poster can also turn to the gig economy for extra income. That’s money that could go into their 401(k) for even larger contributions.

Finally, the poster can examine their spending and find ways to cut back so they’re able to free up more funds for their 401(k). That could mean limiting leisure spending or, if they drive a nice car, swapping it for a less expensive one.

It might also benefit the poster tremendously to talk to a financial advisor. An advisor can help identify ways to cut spending and maximize retirement plan contributions.

Plus, a financial advisor can take a look at the poster’s 401(k) investments and make certain they’re poised for growth. That way, the poster can make the most of every additional dollar they manage to contribute to that account.

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