Saving for Retirement in Your 20s: How to Start

Retirement Planning

This guide is for people starting or building on retirement savings in their 20s. For where balances typically stand across every age group, see retirement savings by age.

Why Saving for Retirement in Your 20s Matters

The following is an illustrative projection based on stated assumptions, not a guarantee: $300 a month at a 7% average annual return, projected to age 67.

Contributing $300/month from 22 to 32, then stopping entirely and leaving the balance untouched until 67, reaches roughly $597,000. Starting instead at 32 and contributing that same $300/month every month for the next 35 years, all the way to 67, reaches roughly $540,000. The earlier saver ends with a slightly larger balance despite contributing only $36,000 in total, compared with $126,000 for the later saver. The difference comes from the extra years the earlier contributions have to compound.

That’s the practical case for starting with a sustainable amount now rather than waiting for a larger paycheck. The amount you contribute still matters, but the years available for compounding are especially valuable at this age. Extra time cannot be recreated later, so making up for a later start generally requires higher contributions.

How Much Should You Save in Your 20s?

Fidelity suggests aiming for about 15% of pre-tax income for retirement, including any employer contributions. Treat that as a long-term target rather than a requirement for your first contribution. On a $50,000 salary, 15% works out to about $625 a month. Starting below that level is still useful, and the rate can rise as your income grows. Someone managing high-interest debt or an unstable income may reasonably prioritize differently for a while before ramping contributions up toward that target. For a number based on your own income and goals, see how much to save for retirement.

What $100, $200, $300, or $500 a Month Can Grow To

The following figures assume contributions start at 22 and continue uninterrupted to 67, at a 7% average annual return, with no inflation adjustment.

Want to test your own numbers, including a different starting age or an existing balance? Use the retirement savings calculator.

Employer Match: What to Do First

Match formulas, contribution thresholds, and vesting schedules vary by employer, so check your plan’s specifics rather than assuming a standard formula. Employer matching contributions increase the amount going into your retirement account, making the full available match a high priority where one exists and your budget allows it.

Roth IRA vs. 401(k) in Your 20s

Capture the employer match first where available. Beyond that, the choice between a Roth IRA and additional 401(k) contributions depends on several variables, not on your age alone.

The right mix depends on your current marginal tax rate versus your expected rate in retirement, Roth eligibility, your plan’s investment options and fees, whether you value the current-year reduction in taxable income from Traditional 401(k) contributions, and how much tax diversification you want across account types. There’s no single order that fits everyone in their 20s. Some workplace plans also offer a Roth 401(k) option, which follows the after-tax, tax-free-withdrawal treatment shown above for the Roth IRA rather than the Traditional 401(k) treatment; check your plan to see which are available.

What If You Start Saving at 25?

Twenty-five still leaves a long runway for retirement saving. Contributing $300/month starting at 25 instead of 22 gives up a few of the earliest compounding years, but still leaves 42 years until a traditional retirement age of 67, more than enough time for consistent contributions to matter. The same priorities apply: capture the match where available, start at a rate you can sustain, automate it, and increase it as income grows. For a broader view of how different ages typically stand, see retirement savings by age.

What If You Don’t Have a 401(k)?

Not having an employer plan doesn’t rule out retirement saving in your 20s. A Roth IRA doesn’t require an employer-sponsored plan; if you have eligible compensation and meet the income rules, it can be a straightforward place to save independently. If you have self-employment income, a SEP IRA may be an option. A Solo 401(k) may also be available, but only if the business has no employees other than you and, if applicable, your spouse; both can potentially allow higher contribution limits than a Roth IRA alone, depending on income and goals. A taxable brokerage account is worth considering once the tax-advantaged options available to you have been weighed first, since it doesn’t carry the same tax treatment.

Student Loans vs. Retirement Saving

These priorities don’t have to be strictly sequential. A reasonable approach is to capture the employer match first if one’s available, make the required minimum payments on student loans, then weigh the loan’s interest rate against your emergency savings and cash-flow stability. Higher-rate debt often justifies a faster payoff before additional retirement contributions beyond the match; lower fixed-rate debt can often coexist with continued contributions. There’s no single interest-rate threshold that decides this for every situation. For a full payoff framework, see how to pay off debt fast.

Emergency Fund vs. Retirement Saving

A starter emergency fund, even one sized to cover a car repair or a gap between jobs, can help prevent an unexpected expense from turning into new high-interest debt. A fuller 3-6 month reserve can often be built alongside continued retirement contributions rather than strictly before them, though an unstable income may justify prioritizing a larger cash buffer sooner. The employer match is generally still worth capturing throughout, where practical. For the mechanics of building the fund, see how to build an emergency fund.

How to Increase Retirement Savings Through Your 20s

• Set up automatic payroll contributions to your workplace plan.
• Automate transfers into an IRA if you’re funding one separately.
• Increase your contribution rate after each raise, before spending adjusts upward.
• Review your plan at least once a year rather than leaving it untouched.
• Watch for lifestyle inflation absorbing every raise instead of part of it.
• Keep the underlying investments simple and diversified rather than picking individual stocks.

For account mechanics and fund selection, see how to start investing.

Brief Benchmark Context

Fidelity’s commonly used benchmark targets 1x your salary by 30. Separately, among families under 35 that hold a retirement account, the Federal Reserve’s 2022 Survey of Consumer Finances reports a median balance of $18,880. These measure different things: one is a planning target tied to an exact age and salary, the other is an observed balance among a broad age band of account-holding families, so neither is a direct test of the other. For the full benchmark, average, and median breakdown across every age group, see retirement savings by age.

Transition to Your 30s

In your 30s, the emphasis typically shifts toward a higher contribution rate while balancing housing, childcare, and other family costs against continued saving. The goal is to build on the system you’ve already established rather than start over. For the full plan at that stage, see retirement savings in your 30s.

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