How Much Should You Save for Retirement in Your 20s?
Even when retirement feels like a lifetime away.
When you’re in your 20s, retirement can feel like a lifetime away. Between rent, student loans, car payments, and just trying to enjoy life, saving for something 40+ years down the road isn’t always top of mind.
But here’s the truth: the earlier you start, the less you’ll need to sacrifice later.
Why Starting Early Matters
Thanks to compound growth (your money earning returns on both your contributions and the growth itself), the dollars you save in your 20s have decades to multiply. For example:
If you save $200/month starting at age 25 and earn an average 7% return, you’ll have about $480,000 by age 65.
If you wait until age 35 to start saving that same $200/month, you’ll only end up with about $240,000.
Starting early doubles your retirement money without doubling your contributions.
The General Rule of Thumb
Most experts suggest saving 10–15% of your income for retirement. In your 20s, that might sound impossible, so here’s how to think about it:
Start small: Even 3–5% of your paycheck gets you in the game.
Build up over time: Every time you get a raise, bump your contribution by 1–2%.
Employer match counts: If your employer matches 3%, and you contribute 7%, you’ve effectively hit the 10% guideline.
Benchmarks by Age
These aren’t hard rules, just guidelines:
By age 30: Aim to have about 1x your annual salary saved.
By age 40: About 3x your salary.
By age 50: About 6x your salary.
By age 60: About 8–10x your salary.
Where Should You Save?
In your 20s, you’ll likely be choosing between:
401(k): Especially valuable if your employer offers a match.
Roth IRA: Great if you qualify (income under $160,000 for singles in 2025). You pay taxes now, and all future withdrawals in retirement are tax-free.
Traditional IRA: Works like a 401(k) but with lower contribution limits and no employer match.
Many people use both a 401(k) and a Roth IRA to maximize flexibility.
Balancing Retirement with Other Goals
Don’t feel guilty if you can’t max out your accounts right away. Focus on balance:
Build an emergency fund (3–6 months of expenses).
Pay off high-interest debt (like credit cards).
Contribute enough to retirement to get your employer match.
Increase contributions as your financial situation improves.
Bottom line: In your 20s, saving something is more important than saving the “perfect” amount. Start where you can, take advantage of employer matches, and let compound growth do the heavy lifting over time.
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