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How to Save for Retirement in Your 20s—Or Even Earlier

Hiranmayi Srinivasan
·6-min read

With all the transitions and milestones that come with your 20s, envisioning your retirement might not always be top of mind. Many of us are going to school, paying off student debt, getting started in our careers, or living on our own for the first time juggling rent and bills. But starting to plan and save for retirement in your 20s (or earlier) can give you a lot of financial security later in life—especially if you want to plan an early retirement. No matter what your current financial situation might be, you can still prioritize saving for retirement.

"When it comes to saving long-term, youth is on our side," says Stan Treger, senior behavioral scientist at investing insights company Morningstar. "The younger we start saving money, the more time we have to keep saving. Furthermore, the more your money 'sits' in the market, the more it grows," says Treger. Here are some easy ways you can start saving for retirement in your 20s that your future self will thank you for.

Put your money in a retirement account.

One of the easiest ways to save for retirement is to open a retirement account, or if you have the option to through your employer, start contributing to your 401k.

"Definitely 401k matching is a big one," says financial coach and founder of the Create Wealth Collective, Sumaya Mulla-Carrillo. "You want to make sure you're getting all of that free money that your employer is contributing."

If you're not sure what your company's 401k matching program is or if they offer retirement plans, talk to your HR department and they should be able to explain it to you. But if you don't have that option, that's OK. You can invest in a tax-advantaged account like an IRA or a Roth IRA. A Roth IRA is a tax-advantaged retirement account where you pay tax on the money you earn now, and put the money in the account where it grows tax-free until you take it out in retirement. An IRA is the opposite. You contribute to the account and pay taxes on the money once you take it out.

"The important thing to know is that anyone can open an IRA," says Mulla-Carrillo. "You can have that and a 401k or just one of those, and you can contribute up to $6,000 a year."

Set aside a portion of your paycheck.

Mulla-Carrillo recommends setting aside 10 to 20 percent of each paycheck to put toward retirement savings. This applies for those with inconsistent pay schedules too. "If you're getting paid inconsistently, make sure you are saving larger chunks from the bigger paychecks to get to that number," she says.

In her 20s herself, Mulla-Carrillo went to school for dance and graduated not having worked a full-time job—and with no desire to, either. "I hadn't worked a full-time job ever, I wasn't planning to, and so I realized that I needed to find a way to set myself up for the future without relying on a full-time employer," she says. After a lot of research, familiarizing herself with investing jargon, and committing to master personal finance, Mulla-Carrillo opened and maxed out her retirement savings. "I started with a robo advisor and once I understood what I was doing more, I moved on to doing it myself, and now I feel like I'm in a good place," she says. Mulla-Carrillo now helps other creatives feel confident in their finances through her program, the Create Wealth Collective.

Another tip is to increase the amount you contribute to your retirement savings each time you get a raise. "This is especially beneficial to younger savers because younger savers will likely experience more pay bumps through their career than would someone who started saving in their 30s or 40s or beyond," suggests Treger. "More pay bumps mean not only more money to spend, but also automatically more money to save."

Make sure you have a solid foundation first.

While it's never too early to start saving for retirement, make sure you have a solid financial foundation first before you begin saving—whether that's in your 20s or earlier. "You can never get started too early. Make sure you have an emergency fund, savings cushion, make sure you're not accumulating credit card debt...so that when you do get into the workplace and start making money, you can really save the majority of it for retirement," advises Mulla-Carrillo.

Aim for an emergency fund of one month of living expenses to start. "Just check that off," says Mulla-Carrillo. For the long run, anywhere between six months to one year of living expenses is a good target.

Starting to save in your 20s and earlier can also help you create good money habits for financial wellness down the line. "Starting our savings journey early could also serve as a type of psychological pre-commitment," says Treger. "A little promise we make ourselves to do something that can increase the likelihood that we’ll actually do it."

If you are working to pay off student loans, you can still save for retirement. "Look at the interest rate of your debt. If there is anything higher than 6 to 7 percent—that number might vary depending on who you talk to—try to pay that off quickly," says Mulla-Carrillo. "Once you have lower interest debt that you're working on, you can invest and pay off that debt simultaneously to really make the most of your money."

Talk to a financial advisor.

Talk to a financial counselor, like a certified financial planner (CFP) or a certified public accountant (CPA). "If you're getting professional help, make sure they are a fiduciary, which is someone who is obligated to do the best for you as a client, so that's definitely a certification to look for, especially with retirement advice," says Mulla-Carrillo.

Your parents and other older adults you know can also be a valuable resource to navigate retirement planning. A survey by Morningstar found that half of the Gen Zers surveyed said they discussed retirement in some form with their parents.

Treger says talking to a retiree might also be good option for those just starting to plan for retirement. "I have seen a consistent, small but positive, correlation between the number of retirees a person knows, regardless of age, and various preparatory attitudes and behaviors such as beliefs that retirement prep is important or is interesting to learn about," says Treger.