Getting Ready for Retirement: In Your 20s

January 26, 2021 by Chevron Federal Credit Union

What do you think you’ll do in retirement? How you decide to spend this time will really determine how much money you may need. Whatever your goals, now is the time to save for tomorrow.

This series will discuss how to save for retirement during each decade, along with the hurdles you may face at different stages of life.

Before we break this series down, here’s some helpful information for one of the big retirement questions:

How much should I save for retirement?

A good rule of thumb is to save between 10% and 20% of pre-tax income. But the truth is the actual amount you need to save for retirement depends on a lot of factors, including:

  • Your age. The earlier you start, the more you’ll have in savings.
  • Whether your employer matches contributionsThe 10% - 20% guideline includes your employer’s match, so if they match dollar-for-dollar, you may be able to get away with less.
  • How long you plan to be retiredWhether you plan on retiring early or living a long and healthy life, you’ll want to save more for the extra time.
  • What you plan to do in retirement. There’s a lot you may want to do after work – travel, home improvements, volunteer, work on a hobby, or spend money on your kids and grandkids.

Any time is a great time to start saving for retirement – just start! Here’s our decade-by-decade breakdown of savings strategies and how to make your retirement a priority.

Saving for Retirement in Your 20s

Every dollar you invest into retirement is worth more the longer it’s invested, so the earlier the better. The issue many people in their 20’s face is when they’re living on an entry-level salary, they may not have a lot to invest. Couple that with student loans and other bills, and retirement starts dropping on the priority list. Here are four savings tips you can start now:

1. Prioritize your 401(k) match

If your company offers a 401(k), a 403(b), or any retirement plan with matching contributions, contribute enough to get the full match. Consider it free money that you shouldn’t pass up.

2. Pay off high-interest debt

After getting that employer match, focus on tackling any high-interest debt, like credit cards or student loans. Debt can keep us in a hole if we don’t plan to pay it off. Once you have your high interest debt under control, then you can use that same “money discipline” to start saving.

If you’re looking for more guidance on getting out of debt and back on the road to financial wellness, check out our How to Escape the Jungles of Debt series.

3. Build your emergency fund

This is a safeguard to keep you from tapping into your retirement savings. By having an emergency fund that could cover your expenses for six to twelve months, you won’t need to tap into your growing nest egg. We recommend keeping these funds in a high-yield savings account to really build that interest. Check out our Money Market Savings and Share Certificates to start yours today.

4. Have S.M.A.R.T. goals

Specific. Measurable. Achievable. Realistic. Time-bound. From cutting down on excess spending to creating attainable financial plans, the S.M.A.R.T. framework can help you turn your “I wish I had…” ideas into “I did it!” successes. For more details on making your financial goals a reality, please see our Have S.M.A.R.T. Financial Goals post.

You’re young and just started our working years – retirement seems like a lifetime from now. It may be a few decades away, but that doesn’t mean we can’t start preparing for it. Remember, the sooner you start saving, the more that money will be worth later down the line and the more stress-free retirement will be. So start your retirement fund today; you will thank yourself for it later.


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