When asked how much should a 40 year old have saved financial experts often suggest that by age 40, you should aim to have saved approximately three times your annual salary. Given that the average full-time salary in Ireland is around €44,202, this translates to a target pension pot of about €132,606.
📊 The Reality: Average Savings at 40
Despite these recommendations, many 40-year-olds in Ireland fall short of this benchmark. The average pension savings across all age groups in Ireland is approximately €111,000.
Moreover, a significant number of individuals in their 30s and 40s have not yet started saving for retirement. A survey indicated that 50% of Irish people aged 30-45 have not begun saving for their retirement. When it comes to how much should a 40 year old have saved a lot of people are falling behind.
🏦 Where Are Savings Typically Held?
For those who have started saving, the funds are often distributed across various channels:
- Employer Pension Schemes: Many rely on occupational pensions provided by employers.
- Personal Retirement Savings Accounts (PRSAs): Some individuals opt for personal pension plans.
- Savings Accounts and Investments: Others may have savings in bank accounts or investments in stocks and property.
However, the average monthly contribution to pensions among 30-45-year-olds is modest, with many contributing around €101 per month.
📉 The Gap Between Reality and Recommendation
The disparity between the recommended savings and actual savings is evident. If the target is €132,606 by age 40, and the average savings are around €111,000 (across all ages), many are behind.
This gap can have significant implications for retirement, potentially leading to a reliance on the State Pension, which currently stands at approximately €12,392 per year.
🛠️ Steps to Bridge the Gap
If you find yourself behind on your retirement savings, consider the following steps:
- Increase Contributions: Aim to contribute a higher percentage of your salary to your pension. At age 40, you can contribute up to 25% of your income and receive income tax relief on this saving.
- Start Now: It’s never too late to begin. The earlier you start, the more you benefit from compound interest.
- Seek Professional Advice: Consult with a financial advisor to create a tailored retirement plan.
- Diversify Investments: Consider diversifying your investments to include a mix of assets that align with your risk tolerance and retirement goals.
Power of Investing at 40 For Your Retirement
Investing €30,000 at an annual return of 9.8% (Southern Cross’s return rate) over 25 years can lead to impressive growth, thanks to the power of compound interest. At this rate, your investment would grow to approximately €333,000 by the end of the term — more than 11 times the original amount.
Here’s how it works: instead of earning interest just on your original €30,000, compound interest means you earn interest on both your initial investment and the interest accumulated over time. With a steady return of 9.8% annually (a rate achievable with a diversified portfolio of stocks and index funds over the long term), your money doubles roughly every 7.5 years. This means by year 8, you’d have about €60,000, by year 15 you’d cross €120,000, and by year 25, you’re in the €330k+ range.
In the context of retirement in Ireland, this kind of growth can be life-changing. The State Pension currently provides just over €12,000 per year — not nearly enough to sustain a comfortable retirement for most people, especially with rising living costs. But having a €333,000 investment pot could supplement your pension by an additional €13,000–€16,000 annually over a 20–25 year retirement, assuming modest drawdown and continued investment growth.
Importantly, starting early is the key. The earlier you invest, the more time your money has to grow exponentially. For someone in their late 30s or early 40s today, making this kind of long-term investment could create a meaningful cushion that gives freedom, flexibility, and security in retirement — whether that means retiring earlier, traveling more, or simply living with less financial stress.
In short, smart, long-term investing in Ireland has the potential to turn modest savings into a powerful retirement tool — and €30,000 wisely invested today could make a huge difference in your future. Keeping in mind that your taxable situation will also need to be taken into account.
🧭 Final Thoughts
While the ideal when asking how much should a 40 year old have saved is to have saved three times your salary, many in Ireland have not yet reached this milestone. Recognizing the gap is the first step toward bridging it. By taking proactive measures now, you can work towards a more secure and comfortable retirement.