How to save money for young adults in retirement

Young adults 18–24 · How-to · Updated October 1, 2026 · LearnLife Editorial

What do you need before starting to save for retirement?

Before you start saving for retirement, gather key financial information and set clear expectations. Begin by examining your current income and monthly expenses to understand your cash flow. For example, if you earn $1,500 a month and spend $1,200 on essentials and discretionary items, you have $300 available for savings or debt repayment. Next, list your debts and their interest rates, such as student loans or credit cards, to plan how to balance paying them off while saving. Knowing this helps decide how much you can comfortably allocate to retirement savings.

You also need to understand different retirement accounts available to you. If you have a job, ask if they offer a 401(k) plan, especially one with an employer match. If not, look into opening an individual retirement account (IRA), such as a Roth IRA, which is popular for young adults because contributions grow tax-free and withdrawals in retirement aren’t taxed. Research the rules for these accounts, including contribution limits and withdrawal penalties. Finally, consider your retirement timeline and what kind of lifestyle you hope to have, which influences how much money you’ll need later. This groundwork makes starting your savings plan clearer and more achievable.

What are the steps to start saving for retirement and why?

Starting to save for retirement involves several practical steps, each with a clear purpose:

1. Set a retirement savings goal: Determine how much money you want to have by retirement age. For instance, if you want $1 million by age 65, you can use online calculators to figure out monthly savings required. This goal motivates you and guides your saving rate.

1. Open a retirement account: Choose an account that fits your situation. If your employer offers a 401(k), it often has tax benefits and sometimes matching contributions. If not, open a Roth IRA online through a bank or brokerage. These accounts offer tax advantages and make saving automatic.

1. Start with automatic contributions: Set up automatic transfers from your checking account or paycheck. For example, automate $50 monthly transfers to your Roth IRA to build a habit and avoid the temptation to skip saving.

1. Contribute enough to get your employer’s match: If your employer matches contributions, contribute at least enough to get the full match. For example, if your company matches 50% on up to 6% of your salary, contribute 6%. This is free money that boosts your savings instantly.

1. Increase contributions gradually: Each year, aim to raise your savings rate by 1 or 2%, especially when you get a raise. If you start at 5% of your income, increasing to 7% over two years adds significantly to your retirement balance without feeling like a financial strain.

1. Diversify your investments: Within your retirement account, spread your money across different asset types—stocks for growth, bonds for stability, and maybe other funds. For example, a 70% stock and 30% bond mix is common for young adults willing to take some risk for growth.

1. Track your progress regularly: Use account statements or apps to monitor how your savings grow. Check at least twice a year. If you’re not on track to meet your goal, consider increasing contributions or adjusting your investments.

1. Stay consistent and patient: Retirement savings build over decades. Avoid withdrawing money early and keep contributing consistently, even if market values fluctuate.

These steps form a solid, practical plan to grow your retirement savings steadily.

How can you tell if your retirement savings plan is working?

Knowing your plan is effective means checking for progress and alignment with your goals. First, review your retirement account balances regularly and compare them to your target growth path. For example, if you planned to save $200 monthly for five years, your balance should reflect your contributions plus investment gains. Use online tools or calculators that factor in expected rates of return to see if you’re on pace.

Second, assess if you consistently make contributions without skipping months. Consistency is key to building wealth. Third, review your investment allocation to ensure it still matches your risk tolerance, which may evolve as you get older or your financial situation changes. For example, a 22-year-old might have an aggressive stock-heavy portfolio, while a 24-year-old with a lower risk appetite might prefer more bond exposure.

Fourth, evaluate if you’re taking full advantage of employer matches or tax-advantaged accounts. Missing out on these can slow progress.

If your savings are growing steadily, contributions are regular, and you remain on track with your goals, your plan is working. If not, it’s time to adjust your approach.

What should you do if your retirement savings plan isn’t working?

If your retirement savings aren’t growing as expected, start by reviewing your budget to find ways to increase your savings. You might cut back on discretionary spending like dining out or subscription services. For example, saving $20 a month by cooking at home adds $240 annually to your savings. Alternatively, consider picking up side gigs or freelance work to boost income.

Next, examine your investment choices. If your portfolio is too conservative (like mostly cash or bonds), it may not grow enough. Consider adjusting to a higher stock allocation, which historically offers greater returns over long periods, though with more short-term volatility. If you’re unsure, many retirement accounts offer target-date funds that automatically adjust investments as you age.

If you’re not contributing enough to get your employer’s match, increase your contributions to capture this free money.

If your employer doesn’t offer a retirement plan, open a Roth IRA independently and start small. Use financial education resources or advisors to get personalized help.

Above all, avoid withdrawing from retirement accounts early, as penalties and taxes reduce your savings. If you face financial hardship, explore alternatives like emergency funds or other loan options.

How do these steps adapt specifically for young adults aged 18–24?

Young adults aged 18–24 have unique advantages and challenges when saving for retirement. One major advantage is time: starting early allows compound interest to work for decades, turning small contributions into significant amounts. For example, if you save $100 per month starting at age 20 with an average annual return of 7%, you could accumulate over $250,000 by age 65.

However, young adults often face student loan payments, entry-level salaries, and other expenses that make saving challenging. Prioritize building an emergency fund (3-6 months’ expenses) alongside retirement savings to avoid debt during unexpected events.

If your employer offers a 401(k), contribute enough to get the full match, even if you can’t save large amounts yet. For those without access to a 401(k), opening a Roth IRA is a smart choice because contributions are made with after-tax dollars, and withdrawals in retirement are tax-free, which suits younger earners who may be in lower tax brackets.

Focus on learning investment basics, such as how stocks and bonds work and the importance of diversification. Avoid risky “get-rich-quick” schemes or withdrawing early from retirement accounts.

Balancing retirement savings with paying off debt and building other financial goals is essential. For example, if you have high-interest credit card debt, it’s usually best to pay that down before increasing retirement contributions.

What practical tips can help young adults stay on track?

• Set reminders: Mark your calendar for quarterly or semi-annual reviews of your retirement savings. For example, schedule a recurring reminder in your phone to check your account balances and update contributions.

• Use financial apps: Many apps allow you to budget, track spending, and monitor investments in one place. Some even offer educational content tailored for young adults.

• Automate savings: Automate transfers to your retirement account right after payday so you’re less likely to skip saving.

• Increase contributions gradually: When you get a raise or bonus, increase your retirement contributions before adding lifestyle expenses.

• Learn continuously: Read articles like How much should young adults have saved for retirement and Investing tips for young adults to build your knowledge and confidence.

• Discuss money with friends: Sharing goals and progress with peers can motivate you and reinforce good habits.

• Avoid early withdrawals: Understand the penalties and tax consequences to protect your savings.

By following these tips, saving for retirement becomes more manageable and less overwhelming.

Frequently asked questions

How much should young adults aim to save for retirement?

A common recommendation is to save at least 10-15% of your income for retirement. Starting small is okay, but increase contributions over time, especially after paying off debts or getting raises, to build a sufficient nest egg.

Can I contribute to both a Roth IRA and a 401(k)?

Yes, you can contribute to both if you qualify. This allows you to benefit from employer matches in your 401(k) and enjoy tax-free growth with a Roth IRA, diversifying your tax advantages.

What if I don’t have a retirement plan at work?

You can open an individual retirement account (IRA), such as a Roth or traditional IRA, through banks or brokerage firms. Starting your own retirement account is essential if no employer plan exists.

Is it better to pay off debt or save for retirement first?

It depends on the debt type. High-interest debts like credit cards should be paid off first. However, if your employer offers a 401(k) match, contribute enough to get the match while paying off debt to maximize benefits.

What should I do if I lose my job or income drops?

Avoid withdrawing from retirement accounts early. Instead, adjust your budget, reduce expenses, and consider temporarily lowering retirement contributions. Rebuild savings when your income stabilizes. If needed, seek financial counseling or support.