Here's How Much You Should Have Invested for Retirement at Age 40

Are your retirement savings on track to meet your retirement goal? It's not always an easy question to answer. That money is growing while you're making new contributions to the fund. The amount may not look like much right now, but you know you'll be adding cash to it -- and making more gains on all of it -- between now and then.

There are some basic benchmarks, though, that can generally tell you if you're making enough progress. Here's a rough estimate of how much you should have saved for retirement by the time you're 40.

A retirement savings benchmark for 40-year-olds

There are a couple of assumptions that must be made to determine if you're saving enough for retirement. Chief among them is that your ultimate retirement goal is replacing at least most of your work-based income once you stop working. The rule of thumb is to plan on generating at least 80% of your last year's salary once you start living off of your retirement savings. Of course, some retirees aim to reproduce 100% of their employment-based wages.

Another assumption being made by most savings-projection models is that you're earning an average amount of money for a person of your age, but that your pay will increase as you become more experienced and bring more value to an employer. For instance, the Bureau of Labor Statistics reports the median annual earnings for all U.S. workers currently stands at $59,540. Younger employees tend to earn less, while older workers tend to earn more (although the disparity between the two groups isn't as wide as you might expect). This means you should be able to save more in the future than you have in the past.

But the averages are, well, the averages, so a figure based on the typical numbers is still a fair benchmark for you to make a loose comparison.

To this end, the typical 40-year-old living in the United States should have something around $200,000 saved up for retirement.

Don't panic if you're not there yet. At the same time, don't pop the champagne corks if your retirement fund's growth is ahead of schedule. That's a benchmark with a wide variance based on how much you're actually making at your job. Some investors that have accumulated as little as $120,000 by this point in their lives are actually doing relatively well for themselves. At the same time, higher-earning individuals should arguably have as much as $300,000 tucked away for retirement. Again, everything is relative to how much income you need to replace later in life.

That's why a different tack may be in order to figure out how well you're doing. Another rule of thumb -- and perhaps a more important rule of thumb -- is that you should have between two and three times your current salary saved up when you're 40 years old if you want to maintain your current standard of living.

With a little discipline and the right plan, it's never too late

Again, don't panic if you're not there yet. Most people aren't at that age. The good news is that you've got 20 or more years to catch up. The key is saving as much as you feasibly can in the meantime.

But how much does that need to be?

Yet another rule of thumb is you should save 15% of your salary for retirement. By doing so, you should have enough saved up by the time you're in your mid-60s to fully replace your employment wages. (That is, if you've invest that money wisely.)

It's a projection, however, that assumes you've been socking away 15% of your earnings since you've been an adult and been working a full-time job. If you're behind on your retirement savings then there's a good chance you've not been saving that full 15%. You'll need to make oversized contributions going forward. Investing 20% of your wages should to the trick.

That's admittedly easier said than done, particularly right now in the wake of rampant inflation. Most people just don't have a whole lot of paycheck left at the end of the month once all the bills are paid.

But whatever sacrifices that can be made to make that happen should be made no matter how difficult it may be to do so. The nickels and dimes will add up.

Just don't forget to put that money to work in the most effective way possible. That's with stocks.

That's not to suggest you should never own bonds or other types of investments with a safer risk profile; everything has its place. With 20 or more years to go before you retire, though, you need growth more than anything else. And you've got plenty of time to ride out and recover from any bear markets that are sure to surface in the meantime. Indeed, you may experience three or more full-blown bear markets before it's time for you to start dialing back the kinds of risk you can afford to take when you're 40.

But what if you're 40 years old and have nothing saved at all? As crazy as it may sound, it's not too late for you either. You'll have to work doubly hard to save up a meaningful retirement nest egg by the time you're in your 60s. Even investing $5,000 per year in an S&P 500 index fund for 25 years, however, puts your tax-deferring portfolio's value in the ballpark of half a million bucks. That's nothing to sneeze at.

Bottom line? No matter where your retirements savings are, you can start doing something to change things for the better today. Even the smallest of actions can jump-start the momentum needed to make bigger changes and achieve bigger results in the future.