Retirement Planning in Your 40s: Where You Stand and What to Do Next

Your 40s are the middle of the working years, with about as much time ahead of you as behind. Here's how your savings compare with other people your age, what the 2026 limits let you put away, and which mid-career mistakes cost the most.

How much do people in their 40s have saved?

Less than the headlines suggest. The Federal Reserve's Survey of Consumer Finances, run in 2025 and published in October 2026, found that about 60% of families headed by someone aged 35 to 44 had any retirement account at all. Among the families that did, the median balance was $61,000. For ages 45 to 54 the share was about 63%, and the median was $133,000.

Median means the middle family: half had more, half had less. And close to four in ten families in both age groups had no retirement account. So if your number feels small, you have a lot of company. Our guide to average and median retirement savings by age breaks the numbers down further.

The "times your salary" targets

You've probably seen these. They're rules of thumb published by investment firms, and each one rests on assumptions that may not match your life.

For age 45, T. Rowe Price's range is 2.5 to 4 times. Look at how far apart the two firms are. Fidelity's figure assumes you save 15% of pay every year from age 25 and retire at 67. T. Rowe Price gives a range because income and marital status change how much of your spending Social Security will cover.

If you earn $80,000 and have $70,000 saved at 42, you're under Fidelity's line and under T. Rowe Price's range too, but you're ahead of the median family with a retirement account in the Fed's survey. What you save from here matters more than where you sit on anyone's chart.

What you can put away in 2026

These are the IRS limits for 2026 for anyone under 50, from the agency's announcement of the 2026 figures.

The 401(k) limit covers your own contributions. Your employer's match sits on top of it.

Few people hit these ceilings, and you don't have to. The rest of the numbers are in our guide to 401(k) and IRA contribution limits for 2026.

Take the full employer match

If your employer matches part of what you contribute, that's pay you only collect by contributing. Say the plan matches half of the first 6% you put in and you earn $80,000. Put in 6%, which is $4,800, and the employer adds $2,400. Put in 3% and you leave $1,200 of it behind, every year.

Match formulas differ from one employer to the next, and some plans have none. Your summary plan description spells out the formula. It also gives the vesting schedule: how long you have to stay before the employer's money is fully yours.

Track down your old 401(k)s

By your 40s you may have worked at four or five places, and each one may have left an account behind.

Start with a list. For each old employer, find the plan's name and who runs it now, then log in or call and confirm your address and beneficiary. Can't find one, or the company's gone? Our guide on how to find an old 401(k) shows where to search, including the Labor Department's free Lost and Found database.

Once you've found them, each account has the same four choices: leave it where it is, move it into your current employer's plan, roll it to an IRA, or cash it out. Fewer accounts are easier to watch. Fees and fund choices differ, though, so compare before you move anything.

• Rolling an old 401(k) into a new employer's plan keeps everything under one login, if the new plan accepts rollovers.
• An IRA gives you a wider choice of investments. See rollover IRA vs. traditional IRA for what the label means.
• Either way, ask for a direct rollover so the money never passes through your hands. Rollover vs. transfer explains why that matters.

Why we wouldn't cash out when you change jobs

Say you have $30,000 in the old plan, you're 44, and your top federal tax rate is 22%. Cash it out and the whole amount counts as income: about $6,600 in federal income tax. Because you're under 59½, the IRS adds a 10% additional tax unless an exception applies. That's another $3,000. You'd keep roughly $20,400 before any state tax.

The plan withholds 20% for federal tax up front, so the check is smaller than you expect, and the rest of the bill arrives when you file.

The larger cost is the 20-plus years that money would have stayed invested. A direct rollover avoids all of it.

Roth or traditional in mid-career?

The difference is when you pay tax. Traditional contributions come out of your pay before income tax, and you pay tax on withdrawals in retirement. Roth contributions go in after tax, and qualified withdrawals come out tax-free.

So the question is whether your tax rate is higher now or later. Nobody knows that for sure, but a few things tilt it:

• A lower-income year (a layoff, a career change, one spouse at home) makes Roth contributions cheaper, because you're giving up a smaller deduction.
• Peak earning years make the traditional deduction worth more.
• Having some of each gives you choices later about which account to draw from. Many plans let you split contributions between the two.

Roth IRAs have an income limit. For 2026, the amount you can contribute phases out between $153,000 and $168,000 of modified adjusted gross income for single filers, and between $242,000 and $252,000 for married couples filing jointly. A Roth 401(k) at work has no income limit.

401(k) loans and hardship withdrawals

These are two different things, and people mix them up.

A 401(k) loan

If your plan offers loans (it doesn't have to), you can borrow up to half your vested balance or $50,000, whichever is less. You repay it from your paycheck, with interest, within five years unless the loan is for buying your main home. There's no tax and no 10% additional tax as long as you keep up the payments.

The risk shows up when you leave the job. The plan can require the full balance back. Whatever you don't repay is treated as a distribution, taxed as income and possibly hit with the 10% additional tax. You do get until your tax return's due date, extensions included, to put that amount into an IRA or another plan and avoid the tax.

A hardship withdrawal

This one is permanent. Plans that allow them limit them to an immediate and heavy financial need, such as medical bills, preventing eviction or foreclosure, funeral costs, or tuition. The IRS is blunt about the terms: you can't repay a hardship distribution or roll it over. It's taxed as income, and the 10% additional tax can apply too.

College savings or retirement?

We'd put retirement first, at least up to the full match. Your child can borrow for college, work, pick a cheaper school, or win aid. Nobody lends you money to retire. There's also a financial aid angle: the federal aid form, the FAFSA, doesn't count the value of retirement accounts such as 401(k)s and IRAs as assets, according to Federal Student Aid.

A 529 plan lets college money grow tax-free when it's spent on qualified education costs. Just don't pause your 401(k) to fund it, and don't plan on a hardship withdrawal for tuition, since that money gets taxed on the way out.

The HSA as a retirement account

A health savings account (HSA) is built for medical bills, but it works well as long-term savings too. You can only contribute if you're covered by a high-deductible health plan, which for 2026 means a deductible of at least $1,700 for self-only coverage or $3,400 for family coverage.

Contributions are deductible, growth isn't taxed, and withdrawals for qualified medical expenses are tax-free. The balance rolls over every year and stays yours if you change jobs.

For 2026 the limits are $4,400 for self-only coverage and $8,750 for family coverage, with another $1,000 allowed from age 55, per IRS Publication 969. Spend HSA money on something other than medical costs before 65 and you owe income tax plus a 20% additional tax. After 65 the 20% goes away, so non-medical withdrawals are taxed like traditional IRA money.

If you can afford to pay today's doctor bills from your checking account and leave the HSA invested, it becomes a pot of tax-free money for health costs in retirement. If your family uses a lot of care, though, compare total costs before you pick a health plan for the HSA alone.

Your 40s checklist

1. Find your plan's match formula and contribute enough to get all of it.
2. List every retirement account you own, including ones from old jobs.
3. Track down any account you've lost touch with and update your address on it.
4. Decide whether to consolidate old accounts, and use direct rollovers if you do.
5. Raise your contribution by 1% of pay, and set it to rise again with your next raise.
6. If you have a high-deductible health plan, open and fund an HSA.
7. Build a cash cushion so a car repair doesn't turn into a 401(k) loan.
8. Update the beneficiaries on every account.

Limits change most years, so check IRS.gov each January. For questions that turn on your own income, see a tax professional.

Common questions

How much should I have saved for retirement by 40 or 45?

There's no official number. Fidelity's rule of thumb is three times your salary by 40. T. Rowe Price suggests 1.5 to 2.5 times by 40 and 2.5 to 4 times by 45. In the Federal Reserve's 2025 survey, families aged 35 to 44 with retirement accounts had a median of $61,000.

Is it too late to start saving at 45?

No. At 45 you could have 20 or more years of contributions ahead, plus catch-up contributions from age 50. Starting with the employer match and raising your rate each year gets you a long way. Our guide to retirement investing for beginners covers what to do with the money once it's in the account.

What happens to my 401(k) loan if I leave my job?

The plan can require you to repay it in full. Any unpaid balance is treated as a distribution, but you have until your tax return's due date, including extensions, to roll that amount into an IRA or another plan.

We base our guides on primary sources such as the IRS, the Department of Labor, and federal regulators. Read our editorial policy. Spot an error? Tell us.