Saving for retirement isn’t hard. Getting started is.
I can teach you how to start saving for retirement so it isn’t intimidating or painful.
So, as a former spender in $206k of student loan debt, I am here to tell you that if I can turn my finances around and get going saving for retirement, so can you.
The sooner you start saving for retirement, the better.
Example: At age 28, a $100 per month contribution ($1,200 annually) at a 3% annualized rate of return, will turn into nearly $80,000 by age 65. If you start at age 38, this same investment amounts to just $50,000. If you start at age 48, this same investment amounts to just $26,000. And we can all hope that the rate of return is much higher than 3%!
If you’re not convinced, here’s an investment calculator – see for yourself.
Now, that you know your future depends on it, here’s a look at how to save for retirement.
1. Determine your investment goals
Ask yourself why you are investing. Is it for retirement? Is it for a long-term goal? Is it for the short-term? Or is it just for fun to learn how to do it? The answers to these questions matter significantly because they require different investing strategies.
If you’re investing for the long-term (e.g.: for retirement), then you can move forward with opening a retirement account that helps you serve this goal. But if you are dabbling in investing for a short-term goal, you should not use a retirement account for this purpose.
2. Create an investment strategy
Once you’re sure you’re investing for retirement (i.e. for the long-term), you need to decide what “investment strategy” you want to take.
Don’t let the term “investment strategy” intimidate you. Investment strategy just means the rules by which you want to invest. It means that you will create somewhat of a plan and stick to that plan while you invest.
A couple questions to think about in this space to get you started: 1) how much money will you be investing, 2) how often will you invest (look up “dollar cost averaging”), 3) what period of time are you planning on investing for (20 years, 35 years?), and 4) what is your risk tolerance like (can you handle the ups and downs of the market?).
Once you get a sense of the answers to these questions, write them down and keep them handy as you open retirement and investment accounts. They should help guide you to make better choices. For example, if you’re investing for the long-term and for your retirement, you will want to learn about mutual funds, index funds, and how they differ from investing and trading individual stocks.
3. Invest in your employer’s retirement plan
If you want to save for retirement, generally, a good place to start is your company’s retirement plan. Your company may offer a 401k, 403b, or 457. If your employer offers an employer match, this is a no brainer – do not pass up free money!
Even if your employer doesn’t have a match, it’s often a really good place to start because it’s easy. You can contribute directly out of your paycheck and the platform is generally set up for you.
Typically, I think your employer’s retirement plan is the best place to start saving for retirement.
4. Open a Traditional IRA or Roth IRA
A second way to save for retirement is through an IRA or Roth IRA.
If your employer doesn’t offer a retirement plan or you want an additional plan, you can invest in a Traditional IRA or Roth IRA.
A traditional IRA is a retirement account that you contribute to with pre-tax dollars, making it a potentially great tax-advantageous vehicle if you are eligible to take the deduction (but not everyone is). Generally, your money will be taxed in retirement, when you take distributions from your IRA (both your contributions and earnings will be taxed). There are certain contribution limits to IRAs. In 2017, if you are under 50, you can contribute up to $5,500 annually ($6,500 if you’re over 50).
Similar to a Traditional IRA is a Roth IRA. A Roth IRA is the same vehicle as a traditional IRA, except certain rules apply. You can only contribute to a Roth IRA if your income is below certain limits. If your income is above those limits, you have to use a traditional IRA. Roth IRA contributions are never tax deductible, but you’re not taxed on the money when you withdraw it in retirement (which is amazing).
- Related: How to Invest in a Roth IRA
5. Open a brokerage account
Finally, once you have maxed out investing in your employer-offered plan and/or an IRA/Roth IRA, you can open your own brokerage account.
This is the last step in the process. The option generally you’d want to look into after you’re maxing out the previous two options.
In terms of where to open a brokerage account, you have several options (Charles Schwab and Fidelity, for example). Choose a reputable one, so do research.
A Final Note!
Retirement can seem so far away. But the sooner you start saving, the better off you’ll be in the long run.
Take one small action today that can move you toward saving for your future. If you’re still not sure where to start, I recommend reading Retire Inspired by Chris Hogan. The book is suuuuper helpful and can guide you through saving for retirement.

Whatever you do, do something to save for your future. You won’t regret it! 🙂

This is fantastic advice which I need right now because I really want to start saving for retirement now (I am in my early twenties too).
Nihaad – the little blog of STUFF
It sounds like it’s the perfect time to start!
Great detailed investment post, Natalie! I’ve actually never had access to a 401(k). Pretty crazy, huh? So, it’s always been just a Roth IRA and brokerage account. I’ve actually been thinking a lot about TradeKing lately. I’m paying $7 per trade at Vanguard, so it may be worth the switch!
Kate @ Cashville skyline recently posted…My Seventh Net Worth Overshare
Yea, I think that’s unusual for our age group! I have only used a 401k (or Roth 401k) and then Tradeking on the side. I certainly would do what you’re doing if I didn’t have a 401k available though.
Hi, Natalie
Your five ways of preparation of retirement are good for anyone to start at any age. The early to start the better because of compounding effect.
Nice and detailed reports in that five areas.
Have a nice week.
-STella Chiu
Stella Chiu recently posted…7 Reasons Seattle is an Awesome City to Live and Visit
Thanks, Stella. That’s what I think, too. You can’t beat the effect of compound interest.
The key lesson here is to just get started saving. Once you start, like many other things, it’s easy to maintain because you get used to saving that money away each pay cycle. I’m a big fan of TradeKing too, I’ve been using them for years with great success.
JIm Wang recently posted…The Upgrade and Save Strategy
Easy to maintain and you will learn more as you do it. Just starting will get you headed on the right path.
So, so important to start early. I’ve never heard anyone complain about having too much money later in life, but I sure hear a lot of folks wish they had more. Besides spending less than you earn this may be the most important factor in life to build wealth. Most folks fear opening an investment account, but regularly contribute to employee retirement plans…there is no difference, it is all investing! Nice write up.
[email protected] recently posted…What Do You Want to Be?
Hahahah that’s a good way to put! No one ever says “oh I saved too much when I was younger”.
Great tips, Natalie. We finally started to NOT cash out my employee stock purchase plan money and invested some of our Young Adult Money money. It’s soooo tempting to cash it out, which I think is the difficulty of non-retirement account savings. I’m not tempted to withdraw from my 401k, but the individual account is really difficult to resist. I just have to keep telling myself that if I keep it invested long-term it’s really going to pay off.
Oh and I can totally relate to you on this 😉 “I’m so focused on paying off my student loan debt that I forget other people aren’t in the same boat as me!”
DC @ Young Adult Money recently posted…Do You Have an Emergency Financial Plan?
That’s a good point. You really have to have a mindset that believes you cannot touch any of the accounts if that’s what you truly want. Harder for the non-retirement accounts.
And thank you. There is comfort in knowing I’m not the only one suffering! 😉
Your reply made me think of a really interesting blog post idea: when to invest in yourself, the stock market, real estate, a business/side hustle, or pay down debt? Right now I’m doing a combination of all of them, but I know some people advocate focusing almost solely on debt until it’s completely gone. But what if that’s at the expense of stock gains, a business that could potentially be sold for a lump sum and/or provide monthly income, or investing in yourself so you can advance at work? Interesting questions and I don’t think a one-size-fits all!
DC @ Young Adult Money recently posted…How to Be Frugal Without Being Boring
I think that is a space that’s somewhat controversial – especially in the finance realm. Personally, I can see the need to not give up free money and investment in your retirement with a match when you’re getting out of debt. But otherwise I advocate focusing solely on getting out of debt. I don’t think market gains are compelling enough (usually – and certainly with student loan interest rates like I have at 7.9%). Sometimes I think people like to do it all because it makes them feel in control and like they are actually managing their money better because they have other things going on that counter their debt, when really paying off debt would / could / should be the main focus.
I wish the internet had existed when I was in my early 20’s so I could find articles like this and set myself up for a better financial future. There is so much good info out there I can’t see how 20-somethings could not get a better start than I did!
[email protected] and the Beach recently posted…A Financial Journey
Thank you, Tonya! I hope that it pays off!!
This would’ve been so very helpful when I was in my 20’s. It’s a good thing, it’s never too late!
I remember when I used to train new financial advisors, and many in their 20’s were shocked that their peers didn’t understand why they should save. The answer? Because no one ever told them to save/invest. I wish that before everyone graduated from college, they had to take a personal money management course. People learn how to manage money for others or for a business but have no idea how to manage their own money wisely or make good decisions. It’s such a shame.
Shannon @ The Heavy Purse recently posted…Life Skills Every Child Needs to Learn
YES! Everyone should have to take a personal money management course before leaving college – or high school! So many people don’t learn until it’s too late.
Great advice. I wish we would’ve thought to open IRA’s a little sooner, but I’m glad we did at least by age 29 and 31. And I”m glad we starting putting 15% in 401k early on. So many young people I know don’t even put enough to get the employer match! I guess new grads aren’t thinking about retirement but it helps so much to get that nest egg growing early.
Kalie @ Pretend to Be Poor recently posted…Hospitality Hacks
It sounds like you are ahead of the game!! I’m 29 and while I have retirement accounts, really until my student loan debt is gone there’s no way I’m contributing that much.
I’m in the same boat you are – at this point, my biggest priority is paying off my massive student loan debt. I want to start saving for retirement because I know it’s best to start saving early, but I can’t afford it while I’m trying to pay off 100k of student loan debt in 3 years (on a low salary). If my company offered a match, I probably would participate in the 401(k) now, but unfortunately, they don’t offer a match. Without that incentive, it doesn’t feel worth it right now. Once my debt is paid off, I plan to put a large portion of my income toward retirement.
Jen @ Frugal millennial recently posted…5 Creative Ways to Save Money on Wedding Invitations
Yep. I hear you. That’s the problem I have and so many other people. I really wish there were more tax breaks for student loan payments – like being able to deduct your entire student loan payment for the year on your return. Something needs to change!
I wish I had started saving for retirement in my early 20s! For some reason, it didn’t matter to me at the time. I am glad I started in my mid-late 20’s though. It’s never too late.
[email protected] recently posted…Amazing eBay Finds (and How to Get Them)
Yea, that is a lot better than later thirties or forties. I wasn’t even working until my mid to late twenties!
I am turning 20 years old next December and would definitely save for my retirement in this very young age because I simply want to have a better retirement life and because I just want to fulfill my long list of plans such as travelling and doing the things I want to do.
Sandra recently posted…Amazon Update Part 10
I started saving for retirement in my 20s based on a lecture from one of my Finance professors in college but I wished that he advised more on saving for life rather than just retirement. The problem with retirement accounts as your only retirement savings vehicle is that the money is tied up (at least with penalties) until a certain age but life is unpredictable and while you might not plan to tough money until retirement, it’s nice to know that it’s available for emergency situations should you need it.
Shannon @ Financially Blonde recently posted…Paying for College
Creative discussion . I am thankful for the details – Does someone know where my company could possibly access a template IL DoR IL-1040 form to edit ?