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By the time you reach 40, your retirement savings should ideally be on track to support a comfortable lifestyle once you stop working. But how do you know if you’re saving enough? Exactly how much should you have for retirement by age 40?

The answer depends on various factors, including your income, current expenses, and long-term financial goals. Below, we’ll walk you through key retirement savings benchmarks, simple ways to calculate your retirement savings target, and how to play catch-up if you’re behind.

Understanding Your Retirement Savings at 40

Whether you have a full-time job or you’re self-employed, a smart way to save for retirement is in a retirement savings account, such as 401(k) or an individual retirement account (IRA). Unlike regular investment accounts, these accounts give you a tax break on your savings, either upfront or down the line when you withdraw the funds.

In the meantime, your money grows without being taxed.

A general rule of thumb is to save at least 15% to 20% of your income into your retirement fund. However, you may need to adjust this percentage based on your income and current monthly expenses.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

Retirement Savings Benchmarks for 40-Year-Olds

Financial experts provide benchmarks to help gauge whether you’re on track with retirement saving. A common guideline suggests having two to three times your annual salary saved in a 401(l) or IRA by 40. For example, if you earn $80,000 per year, you should aim for $160,000 to $240,000 in retirement savings.

If you haven’t reached this benchmark, however, don’t get discouraged. There are ways to boost retirement savings in your 40s, plus ways to play catch-up later (more on that below).

Analyzing Personal Financial Circumstances

As you enter your 40s, it’s likely that your income is increasing. However, your expenses and financial obligations may also be on the rise. You may be managing mortgage payments, still paying off student loans, and also trying to save for a child’s future college education. Here’s a look at how to balance it all.

Income and Earning Potential

Your income level directly affects how much you can save for retirement. If your income is modest and your expenses are high, it may be difficult to put 10%, let alone 15%, of each paycheck into retirement. The key is to save a consistent percentage of each paycheck, even if it’s small. As your income grows, so will your contributions. As you earn more, you can also gradually bump up the percent you put into retirement savings.

Current Debt and Financial Obligations

In your 40s, you may have debts, which can hinder your ability to save for retirement. Which is wiser — saving for retirement or paying off your debts?

A general rule of thumb is to prioritize paying off high-interest debts, like credit cards, over saving for retirement. This is because your investment returns likely won’t exceed the interest you’re paying on your balances. With other debts, like student loans and a mortgage, however, it’s generally a good idea to balance paying them off while consistently contributing to retirement savings.

Recommended: Money Management Guide

Calculating Your Retirement Savings Target

So how much 401(k) should you have at 40? There are two guidelines financial planners often use to help people determine how much they should have in retirement savings. Here’s a closer look at each.

Salary Multiplier Method

This approach recommends saving a multiple of your salary at different life stages. While this method doesn’t account for any unique lifestyle choices or financial needs, it provides a quick and easy way to assess your savings progress at various ages.

Retirement Savings By:

•  Age 30: 1x your annual income

•  Age 40: 3x your annual income

•  Age 50: 6x your annual income

•  Age 60: 8x your annual income

•  Age 67: 10x your annual income

Income Replacement Ratio Approach

This method focuses on saving enough to replace 75% of your pre-retirement income annually once you stop working. So if you think you’ll be making $100,000 in the last few years before retirement, you would plan on needing $75,000 a year to live on once you stop working.

There are a few reasons you’ll likely need less than your full income after retirement:

•   Your everyday expenses will likely be lower.

•   You’re no longer a portion of your earnings into retirement savings.

•   Your taxes may be lower.

How to Maximize Your Retirement Savings in Your 40s

Maximizing contributions to tax-advantaged accounts such as 401(k)s and IRAs can accelerate your retirement savings in your 40s.

Contribute to Retirement Accounts

If you have access to a 401(k) at work, you ideally want to contribute up to the max allowed by the Internal Revenue Service (IRS). For tax year 2025, the most you can contribute to a 401(k) is $23,500 if you’re under age 50. For 2026, the maximum rises to $24,500.

If you don’t have access to an employer-sponsored retirement plan, you can open an IRA and set-up automatic transfers from your checking account into the IRA each month — ideally up to max allowed for an IRA. For tax year 2025, you can contribute up to $7,000 if you’re under age 50, and for tax year 2026, you can contribute up to $7,500 if you’re under age 50.

You can make 2025 IRA contributions until the unextended federal tax deadline.

Take Advantage of 401(k) Matching

Employer-sponsored 401(k) plans often come with matching contributions. If your employer offers this benefit, consider adjusting your contributions to get the full match, since this is essentially free money. Over time, compound returns (which are the returns you earn on your returns) on these extra contributions can lead to substantial growth.

Leverage Catch-Up Contributions

Once you reach age 50, you can make catch-up contributions to your 401(k), which could help you save even more for retirement.

For tax year 2025, the 401(k) catch-up contribution is an extra $7,500 on top of the regular $23,500 limit (for a total limit of $31,000), and for tax year 2026, the catch-up contribution is an extra $8,000 on top of the regular $24,500 limit (for a total limit of $32,500). In both 2025 and 2026, those aged 60 to 63 can contribute up to an additional $11,250 (in place of the $7,500 in 2025 and the $8,000 in 2026), if their plan allows it.

Under a new law regarding catch-up contributions that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. Because of the way Roth accounts work, these individuals will pay taxes on their catch-up contributions upfront, but can make eligible withdrawals tax-free in retirement.

The IRA catch-up contribution is $1,000 for 2025, for a total contribution limit of $8,000 for those age 50 or older. In 2026, the IRA catch-up contribution is $1,100 for a total contribution limit of $8,600 for those age 50 or older.

Expert Strategies to Increase Retirement Savings

There are a number of smart ways to maximize your savings and stay on track for retirement. Here are a few strategies experts advise.

Salary Negotiations and Their Long-Term Impact on Savings

If it’s been a while since you’ve received a raise, this may be a good time to ask for one. By age 40, you’ve probably developed skills that make you valuable to your employer. To increase your chances of success, it can be helpful to research industry standards, highlight your achievements, and demonstrate your value to the company.

Even small salary increases can have a compounding effect on long-term savings. If you need some incentive for negotiating for a higher salary, consider this: Increasing your retirement contributions by just $25 a month for the next 20 years can add an extra $13,023.17 to your retirement fund, assuming a growth rate of 7.00% and monthly compounding.

Building a Solid Financial Foundation With a Six-Month Emergency Fund

Having an emergency fund that contains at least six months’ worth of living expenses is also critical to your retirement plan.

Why? While retirement is still a long way off if you’re 40, an emergency could happen at any time. For instance, you may get hit with an unexpected medical bill or your heating system might break in the middle of winter and need to be replaced. If you don’t have the emergency funds to cover these things, you might be forced to dip into your retirement fund early (and pay penalties) or run up debt that could limit your ability to save for retirement.

You might open a high-yield savings account for your emergency fund to help it grow. Consider automating your savings to make sure you’re contributing to your emergency fund regularly. Once it’s fully funded, you can allocate the money you had been contributing to the emergency fund to your retirement savings.

Recommended: Emergency Fund Calculator

Why Prioritizing Roth Retirement Accounts Can Pay Off

A Roth IRA or Roth 401(k) is a retirement account that taxes your contributions up front, but your withdrawals in retirement are tax-free, including all your growth. This differs from a traditional IRA, which involves tax-deferred contributions, meaning you’ll pay taxes every time you withdraw money, including on your growth. A Roth IRA or 401 (k) can be especially beneficial if you anticipate being in a higher tax bracket later in life.

Even if you have a 401(k) at work, you can add a Roth IRA to boost your retirement earnings. However, there are contribution and income limits with Roth IRAs that you’ll need to keep in mind.

The Role of Expenses in Retirement Planning

Figuring out how much your retirement living expenses will be is important for calculating how money you’ll need to save. These are some of the things you may want to consider and budget for when figuring out how much to save for retirement.

Planning for Health Care Expenses in Retirement

As people grow older, their health care needs and costs typically increase. For many, health care can be one of the biggest retirement expenses. Fidelity estimates that the average person may need $165,000 to cover health care costs in retirement.

If you have a high-deductible health insurance plan, you might want to set up a health savings account (HSA). An HSA is a tax-advantaged account that can be used to pay for medical expenses. You can invest the money in an HSA, and if you leave it untouched, it will grow and earn interest. When you make withdrawals in retirement, you won’t pay any taxes if you spend the money on qualified health care expenses.

Long-term care insurance is another option to consider for covering health care costs later in life. Researching Medicare options and potential out-of-pocket expenses ahead of time can help you prepare for future medical needs.

Incorporating Home Costs Into Retirement Savings

Housing costs are another major retirement expense. You may have mortgage payments, homeowner’s insurance, and home maintenance and repairs to pay for. If you rent, you’ll have to cover your monthly rental fee plus renters’ insurance.

If you’re planning on a move after you retire, where you choose to live can have a major impact on how much you pay for housing. In general, living on the coasts can be more expensive. You may want to take the cost of living into consideration when you’re thinking about where you want to live in retirement.

Family and Retirement: Balancing the Present and Future

Along with planning for retirement, you may be saving for important family milestones, such as college and a child’s wedding. Fortunately, with proper budgeting and planning, it is possible to help cover these expenses and save for retirement at the same time.

Budgeting for College Savings While Prioritizing Retirement

To help your children with the cost of college, consider opening a 529 plan. You fund this account with after-tax dollars, but your money grows tax-free and withdrawals for qualified education expenses are also tax-free.

Just keep in mind: Financial experts generally recommend that people in their 40s prioritize retirement savings over college savings. The reason? Financial aid can help fill a college funding gap, but there’s no financial aid for retirement, so you’ll want to ensure your retirement contributions remain consistent.

You might funnel extra funds toward college saving. You can also let family members know they can contribute to a child’s 529. For instance, instead of birthday gifts, you might ask loved ones to contribute to your child’s 529 instead.

Weddings and Other Major Family Expenses

If you’d like to help pay for your child’s wedding or first home purchase it’s a good idea to save for those goals separately, so they don’t disrupt your retirement savings progress.

If the wedding or home purchase is coming up in the next few years, you might open a high-yield savings account earmarked for that goal. If these family expenses are well off in the future, you might want to invest in mutual funds or a stock index fund, which could deliver more growth (though returns are not guaranteed).

The Takeaway

While there are several rules of thumb as to how much money you should have saved by 40, the truth is everyone’s path to a comfortable retirement looks different. One piece of advice is universal, however: The sooner you start saving for retirement, the better your chances of being in a financially desirable position later in life.

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When deciding on a student loan repayment schedule, the option with the lowest possible monthly payment is not always best.

That’s because of amortization, the process of paying back a loan on a fixed payment schedule over a period of time. A repayment option with the lowest monthly payment typically means the loan is stretched out over a longer time frame. This results in the borrower paying more in interest than they would have with a shorter loan term and a higher monthly payment.

Read on to learn more about student loan amortization, how it affects your monthly payments, and ways to potentially lower the amount you pay in interest on your student loans.

Exploring Amortization

Student loans are amortized because they are installment loans that have fixed monthly payments. Here’s a closer look at the process of student loan amortization.

How Amortization Works for Student Loans

With an amortizing loan, a borrower pays both the principal balance and interest each month. This is called a student loan amortization schedule. The schedule begins with the full balance owed, and the payments are then calculated by the lender over the life of the loan to cover the principal and interest.

Interest vs Principal Over Time

At the beginning of a student loan amortization schedule, payments typically cover more interest than principal. As time goes on, a bigger amount goes toward the principal.

To help determine amortization on your student loans, it’s important to first calculate the cost of the loan. You’ll need to know these three variables:

1.    The loan principal, which is the original amount you borrowed

2.    The loan’s interest rate and annual percentage rate (APR)

3.    The duration, or term, of the loan

Using this information, you can calculate student loan payments, including both the monthly amount and the total interest paid on the loan.

The next step is to determine how much of each monthly payment is going toward both interest and principal. That’s when the loan’s amortization schedule comes into play.

Student Loan Amortization Examples

To see how amortization works, we’ll look at a student loan that’s being paid by the borrower under the standard 10-year repayment plan. We’ll also look at how amortization changes when the borrower directs extra money to pay off the loan faster and reduce the amount of interest paid overall.

Standard Repayment Schedule Example

Let’s say a borrower takes out a $30,000 student loan at a 7.00% interest rate, amortized over a 10-year repayment period.

The borrower’s monthly payment is approximately $348. Each year, the borrower will pay about $4,180 in total on their loan. While these monthly and yearly amounts will remain the same, the proportions allocated to the principal and interest will change.

The chart below shows you what the student loan amortization schedule might look like for this loan. The chart illustrates the principal and interest amounts monthly for the first year and the last year of the loan, and annually for the years in between.

Amortization schedule for $30,000 student loan with 7.00% interest over 10 years

Using this estimated example, during the first year, the borrower’s monthly payments would be about half interest and half principal. With each passing month and year of paying down the debt, more of each payment is allocated to the principal. By the final year, the borrower pays only $154 to interest and $4,026 to principal.

Accelerated Payments and Interest Savings

Using the example above, a borrower would pay $11,799.05 in interest on the loan overall. That brings the full cost of the loan to $41,799.05, and it will take 10 years to pay off.

However, making accelerated payments can help a borrower pay off the same loan faster and save a significant amount of interest.

Here’s how accelerated payments work: Let’s say you pay an additional $50 on the loan every month. So instead of a monthly payment of $348, you make payments of $398. Each year, you’ll pay $4,776 on the loan. As your loan balance goes down faster, the amount of interest you owe will also decrease.

The total interest you’ll pay overall using this method is $9,627.27. That brings the full cost of the loan to $39,627.27. So you’ll save more than $2,100 by making accelerated payments. And you’ll pay off the loan in 8 years and four months, instead of 10 years — almost two years early.

Recommended: The Average Cost of College Tuition

Alternative Repayment Plans and Amortization

The 10-year Standard Repayment Plan isn’t the only option for repaying your student loans. There are alternative plans that lower your monthly payments, and some that also extend the repayment term. When you switch to a new repayment plan, your amortization schedule changes.

Income-Driven Repayment Plans

Income-driven repayment (IDR) plans base your payments on your discretionary income and family size. The monthly payments with IDR plans are generally lower than with the current standard plan because repayment is stretched out over 20 or 25 years rather than 10.

As of January 2026, there are three IDR plans available: Pay as You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). On the Income-Based Repayment plan, if you still have a balance at the end of your term, the remaining amount might qualify for student loan forgiveness.

While IDR may be an option if you’re struggling to make your current monthly payments, it’s important to understand that not only will you likely pay more in total interest on one of these plans because the repayment term is longer, but it’s also possible that your payments will dip into what is called negative amortization.

Negative amortization on a student loan is when your monthly payment is so low that it doesn’t cover the interest for that month. When this happens, it can cause the loan balance to increase.

This is not ideal, of course, but utilizing an income-driven repayment plan is a far better option than missing payments or defaulting on a federal student loan.

Graduated and Extended Repayment Options

Other federal loan repayment plans that can currently lower your monthly payments are the Graduated and Extended Repayment plans.

The Extended Repayment Plan allows borrowers to repay their loans over a period of up to 25 years. Because of the long loan term, monthly payments will generally be lower, but borrowers will pay more in interest over the life of the loan compared to plans with shorter terms. To qualify, a borrower must have more than $30,000 in outstanding Direct Loans or more than $30,000 in outstanding Federal Family Education Loans (FFEL) loans.

Under the Graduated Repayment Plan, a borrower starts with lower monthly payments that are gradually increased, typically every two years, over the course of 10 years. Your payments will never be less than the amount of interest that accrues between payments.

Managing Student Loan Amortization

To avoid the full impact of an amortized student loan, there are strategies that can potentially help lower your interest payments.

Strategies to Pay Down Principal Faster

•   Pay extra on your loan. You can do this by paying more than you owe each month, or by making additional payments on your student loan, if you can afford to. Paying off the loan early may help you to pay less interest over the life of the loan.

•   Take advantage of financial windfalls. If you get a bonus at work, a tax refund, or a generous gift from a relative, use that money to put additional funds toward your student loans.

•   Make biweekly payments. With this strategy, you pay half your monthly payment every two weeks. After a year, you will have made one additional month’s payment on your loans, without it feeling like a heavy financial burden.

Using Extra Payments Effectively

If you opt to pay more than your minimum payments or make additional payments on your loans, let your lender know that the additional amount or payment should be applied to the principal of the loan, not the interest. That way, the extra funds can help lower the principal amount, which in turn reduces the interest you owe and can help shorten your loan term.

How Refinancing Affects Amortization

When you refinance student loans, you replace and pay off your existing loans with a new loan from a private lender, which changes your amortization schedule.

Resetting the Loan Term and Its Impact

Because you take out a new loan when you refinance, the repayment term gets reset and the new loan gets a new amortization schedule. You might be able to shorten the repayment term to pay off the loan faster (which would mean higher monthly payments), or lengthen the term to lower your monthly payments.

Just remember, you may pay more interest over the life of the loan with a longer loan term. A student loan refinancing calculator can show you how much you might save by refinancing.

Potential for Interest Savings

Ideally, with refinancing, you may get a lower interest rate if you qualify. A lower student loan interest refinancing rate would save you money in interest and lower the cost of the loan overall.

One important thing to be aware of is that if you’re refinancing federal loans, you lose access to federal benefits and programs such as income-driven repayment and federal forgiveness. When considering whether to refinance, borrowers should think carefully about whether they might need these benefits.

Recommended: Consolidation vs. Refinancing

The Takeaway

With student loan amortization, more money typically goes to interest than loan principal, especially at the beginning of the repayment term. The type of repayment plan and strategy a borrower chooses can make an impact on amortization.

A longer repayment plan may lower monthly payments, but cost more in interest over the life of the loan. Accelerated payments could save money on interest and the overall cost of the loan, and result in paying off the loan faster. And if a borrower is eligible for a lower interest rate, student loan refinancing is one alternative that may reduce monthly payments and interest paid over the life of the loan.

Weighing all of the options can help determine what course of action makes the most sense for you.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

What is amortization and how does it apply to student loans?

Amortization is when loan payments are spread over a set period of time with fixed regular payments going toward the interest and loan principal; at the beginning of the repayment term, more interest goes toward the interest than the principal. Student loans are amortizing loans because they have fixed monthly payments.

Can I change my student loan amortization schedule?

Yes, there are a few different ways you can change your amortization schedule. First, you can do it by changing your repayment plan. With federal student loans, you could switch from the 10-year Standard Plan to an income-driven plan, for example. Another way to change your amortization schedule for federal or private loans is to make extra payments toward the principal, which reduces the interest you pay and shortens your loan term. Finally, refinancing student loans can also change your amortization schedule.

How can I reduce the interest paid over the life of the loan?

To reduce the interest paid over the life of the loan, you can pay more than the minimum amount due on your loan or make additional payments. Just be sure to direct that extra money toward the loan principal. Paying down the principal reduces the amount of interest you’ll pay overall and may even help you pay off your loan faster.

Does paying more than the minimum affect amortization?

Yes, paying more than the minimum affects the amortization of your loan, especially when you direct the extra money toward the loan principal. Reducing the principal means you’ll pay less in interest and typically pay off the loan faster.

How does refinancing impact my amortization schedule?

Refinancing affects your student loan amortization schedule because when you refinance, you get a new loan with new rates and terms and a new amortization schedule. If you qualify for a lower interest rate, you could save money in interest and on the cost of the loan overall. You could also choose to shorten or lengthen your loan term. Just be aware that lengthening your loan means you’ll pay more in interest over the life of the loan.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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