40 Years Old With Almost No Savings? Here's Your Path to $1 Million in the Bank

A recent survey by SecureSave found that 67% of Americans could not cover an unplanned $400 expense by dipping into their personal cash reserves. So if you've reached your 40th birthday with virtually no money in a savings account, you're probably in pretty good company.

Now, let's be real for a minute. It's not a wonderful thing to be 40 years old with very little money in the bank or set aside in a retirement savings plan like an IRA. At that point, it's likely that you've been working for several years, so it's unfortunate to have almost no savings to show for it.

But maybe you've never managed to command more than an average wage, which is why your savings haven't been able to grow. Or maybe you've just been hit with different problems, like job loss and medical issues, that have made it difficult to grow your wealth.

The good news is that even if you're 40 with virtually no savings, you can still manage to amass $1 million in your lifetime -- and in time for retirement. But you need to be willing to prioritize your savings. And you might also need to step outside your comfort zone as an investor.

How to get back on track

If you're a moderate or higher earner and are looking to build a $1 million nest egg, you're apt to have an easier time doing it than someone who's a lower earner. But if you're in the habit of spending almost your entire paycheck month after month, then it almost doesn't matter how much you earn. At the end of the day, you're going to need to get on board with the idea of cutting some expenses and making your savings your priority.

So, let's say you earn $60,000 a year. It's probably not reasonable to assume you can start setting $2,500 a month aside in savings. That's half of your income! But it may be possible to allocate $500 a month to savings, or $6,000 a year. That's 10% of your income, which is far more reasonable.

Once you're able to trim your spending to carve out that money for savings, your next step is to invest your money in a manner that generates solid growth. Stocks are generally your best bet in that regard.

You may be nervous to invest in stocks because they can be volatile. But long-term investors tend to come out ahead financially in the stock market, so that's something important to keep in mind if you're hesitant to buy stocks.

Over the past 50 years, the stock market has generated an average annual return of 10% before inflation, as measured by the S&P 500. So if you were to invest $500 a month at 10% over 30 years, you'd end up with about $1 million. And if you're starting at age 40, that would put you at age 70, which is a reasonable age to retire at.

Now, let's say you're a higher earner making $100,000 a year. Parting with 10% of your income means saving $833 a month. If you were to do so and invest your money at an average annual 10% return, it would only take you around 25 to 26 years to reach the $1 million mark.

You're not doomed

If you're 40 years old without savings, the idea of ever having $1 million to your name might seem laughable. But it may be more attainable than expected.

Of course, cutting back on spending to free up money for savings and investing purposes isn't an easy thing. And if you really don't have expenses you can cut, you may need to resign yourself to working a side job to drum up the money.

The point, however, is that while 40 might seem old in the context of first starting to save and invest, it really isn't. You might still have many years ahead of you before retirement rolls around. And if you're able to commit to saving money and putting it to work in the stock market, you may be pleasantly surprised at how much wealth you're able to grow over time.