Saving money for your future is not a simple task. If you've managed to accumulate a sizable amount, it can be spent quickly for an emergency or to buy a large asset. By the time you and your spouse are 40 years old, you may need money in your savings so you can retire at a reasonable age.

Savings

40 year old man looking at bank accounts online
40 year old man looking at bank accounts online

The amount you need to save by age 40 depends on how much money you require when you retire and how much interest you make. It's common to calculate a percentage of your current income, such as 75 or 80 percent, that you must make in your retirement years. If you and your spouse need $1 million by the time you are in your mid-60s, and you have no savings at 40, you must save about $10,000 per year in an account or investment earning 9 or 10 percent return. If you have 20 years before retirement age, and you've saved $75,000, you need to continue to save about $5,000 a year in an account that earns 5 to 6 percent interest, recommends the website Bankrate.

Retirement Income Sources

business woman explaining retirement plan to employee
business woman explaining retirement plan to employee

The money you save by age 40 can be diversified. For example, choose savings, certificates of deposit, individual retirement accounts or a combination. Derive income from investments such as stocks, bonds or real estate. In addition, your company may have its own retirement plan. If you qualify for Social Security benefits, your savings need only make up the difference between your government payments and the amount you require annually.

Strategies

couple reviewing investment options
couple reviewing investment options

If you haven't saved money by the time you are 40, and you won't be able to put away at least $10,000 a year, employ strategies to lower your cost of living so you won't need as much money after you retire. Pay off your credit card bills and any short-term loans. Place as much money as your employer allows in retirement accounts where your company matches your contribution. Don't withdraw any of the money you are saving for retirement. At 40, you will have to save more per year to make up for the amount you use.

Starting Early

woman calculating savings amount
woman calculating savings amount

Save about 10 percent of your annual salary each year, starting in your early 20s. Use a retirement calculator to keep on course for saving enough money. When you are 40, make sure the money you've accumulated and the investments you have will pay off at retirement age. Adjust your calculations and make a plan to save the amount you will need.