Turning 40? Here’s What Your 401(k) Should Look Like

With the cost of everything from groceries to rent prices continuing to skyrocket, it can be tough to save money. Luckily, many companies offer a built-in shortcut with 401(k) options, and it's especially beneficial when they're willing to match your contributions.

While the market has been volatile at the start of the year, a report by Fidelity shows workers in their 40s are still sticking to their 401(k) contributions. Not only did many continue but just over 17% of workers increased their contribution rate. And just under 5% decreased it.

Fidelity also reports that Q1 saw a record total savings rate of 14.3%. This is thanks to an average 9.5% employee contribution and a 4.8% employer match, the closest we’ve ever come to Fidelity’s recommended 15% savings rate.

After reading these numbers you might think you're either ahead of the game or falling a little behind. Let's breakdown what financial experts say should be in your 401(k) in your 40s.

Which Generation Saves the Most?

According to Fidelity, the generation Gen X, or people in their late 40s now, are contributing an average of 15.4%. Millenials, or workers in their 30s or early 40s, are saving an average of 13.4%. And Gen Zs, or workers in their 20s, are saving a lower percentage average of 11.2%.

This trend could be due to a few different factors.

The first being Gen X's are typically farther along in their careers, and making more money than the average millenial or Gen Z, meaning they are capable of saving more.

The second being they're saving more aggressively as they're approaching retirement.

According to a study by The Kaplan Group, Gen X save much more annually than their younger generations.

“The 35-44 age group represents the average, showing a gradual improvement in financial management as they gain experience and stability,” the report says. “This progression underscores the importance of financial education and experience in achieving better financial outcomes over time.”

With that in mind, let's look at how much you should be saving.

How Much Should Be in Your 401(k)?

By 40 years old, Fidelity recommends you should have 3 times your annual salary saved. So, if you make $70,000 a year, you should have $210,000. By 50 years old, that recommendation jumps to 6 times, or $420,000.

These numbers cover all of your retirement savings,not just your 401(k). So any other money you may have tucked away in other investments, that count towards this too.

Unfortunately, between debt, children, bills, and inflation, it can be tough for some people to get there. In fact, according to a survey by Bankrate, almost 70% of Gen X's feel behind on their retirement savings.

If you're in your 40s or 50s and have no one near that saved, there are steps you can take to boost your savings.

How to Boost Retirement Savings

Here are some simple and actionable ways Gen X's can boost their retirement nest egg.

• Max out your workplace plan: Contribute at least enough to take advantage of your employer's full match, then push toward the IRS limits, including the extra $7,500 "catch-up" contribution once you hit 50.

• Automate and ramp up your savings rate: Set your payroll deductions to autopilot if you haven't already, and aim to contribute at least 1% more every year. Also, be sure to dedicate a chunk or bonuses or raises to your retirement fund.

• Pay down high-interest debt: Work to pay off credit cards and other high-interest debt first. Freeing up cash flow helps you contribute more to your savings.

• Fund a Health Savings Account (HSA): If you have a high-deductible health plan, an HSA offers triple tax benefits - deductible contributions, tax-free growth, and tax-free medical withdrawals.

• Diversify your portfolio: Balance growth and stability of your savings with stock, bonds, and alternative assets. Those behind on their savings might lean more towards equities, but always match your risk tolerance and time horizon.

• Delay social security: If you can, hold off on claiming social security benefits before full retirement age to help you earn a higher guaranteed check for life.

• Get a side gig: Finding some extra income to make on the side can be extremely beneficial when it comes to saving a little extra. Consider things like freelance work, consulting, tutoring, crafting, or delivery services.