Typically, people start preparing seriously for their retirement once they reach their 40s. If you wait that long, though, financing your whole retirement will take some hefty saving. Starting your savings as early as your 20s makes a real difference. By starting in your 20s, you can put away smaller amounts plus you’ll amass a larger nest egg in the long run.


Saving for retirement early in life gives you the possibility to gain hundreds of thousands of dollars in free interest before you retire!

Ideally, you should start saving for your retirement as soon as you can afford to. Let your first regular paycheck mark the beginning of your retirement savings. Saving a little bit at a time makes a difference if you start early, and you’ll be glad you got a head start on putting money aside as retirement approaches.

Advantages of Getting Started Early

Consider these advantages of saving for your retirement in your early 20s:

1. Affordable deposits. Saving for your retirement won’t put a drain on your finances as long as you base your savings on what you can afford. Saving now will allow you the smallest possible deposits because they’ll have many years to grow.

2. Retirement accounts are a great safety net. Cashing out a retirement account early certainly isn’t recommended, but you’ll always have this option if you find yourself in a difficult situation.


3. Time for your money to grow. You’ll have more funds available when you retire, thanks to interest and investment returns adding up over the years.

4. Time to recover if something happens on the markets you invest in. The stock market can crash, but your position might gain value again in the future.

5. Having time to recover also means you can afford to take more risks. This means you can pick high risk investments with a much higher potential return and see your portfolio grow faster than it would if you stick to safer investments.

6. Tax advantages. Your contributions to qualified retirement plans or IRAs can reduce your income taxes.

Great Ways to Save and Invest at an Early Age

There are some very good options available to you to start saving in your early 20s:

1. A 401(k) through your employer. This is a great option, especially if your employer matches your contributions. There are two common mistakes to avoid when it comes to 401(k) accounts:

* Opting out of a 401(k) account. A 401(k) account is really the easiest way to start saving for retirement. Plus, if your employer matches your contributions, you’re just leaving free money lying on the table if you opt out. After 40 years of investment returns, this free money could be worth $10,000, $100,000, or even more.


* Cashing out or losing your 401(k) when you change jobs. Instead, you can either roll this account over into an IRA or to a new 401(k) through a different employer.

2. Open a Roth IRA if your employer doesn’t offer retirement benefits. Go over your budget to figure out how much you can realistically contribute to this account on a monthly basis and stick to this goal. Even if it’s a small amount, go for it!

The key is to get started saving on a monthly basis. Develop this habit and it will serve you well for the rest of your life. Later on down the road, as your income increases, you can always increase your savings amounts. Getting started early, making saving a habit, and keeping track of how your investment accounts are performing will help you save up enough to retire comfortably.

There are no excuses not to save, since you can get started with small monthly contributions and can open an IRA account if your job doesn’t offer a 401(k).