When Should You Start Saving for Retirement?
If you ask any financial advisor when you should start saving for retirement, their answer would likely be simple: Now, or in your 20s if possible.
It’s not always easy to prioritize investing for retirement. If you’re in your 20s or 30s, you might have student loans or other goals that seem more “immediate,” such as a down payment on a house or your child’s tuition. But starting early is important because it can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.
No matter what age you are, putting away money for the future is a good idea. Read on to learn more about when to start saving for retirement and how to do it.
Key Points
• Starting to save for retirement in your 20s is ideal, as it gives your money more time to potentially grow and benefit from compounding. Compounding occurs when any earnings received are added to your principal balance, so future earnings are calculated on this updated, larger amount.
• Assessing personal financial situations and retirement goals is crucial when determining how much to save for retirement, regardless of age.
• Individuals in their 30s, 40s, 50s, or 60s can still successfully start saving for retirement, with different strategies tailored to each age group.
• Regular contributions and taking advantage of employer-sponsored plans are key steps in building a solid retirement savings strategy at any age.
This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.
What Is the Ideal Age to Start Saving for Retirement?
Ideally, you should start saving for retirement in your 20s, if possible. By getting started early, you could reap the benefits of compound interest. That’s when money in savings accounts earns interest, that interest is added to the principal amount in the account, and then interest is earned on the new higher amount.
Starting to save for retirement in your 20s can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.
That said, if you are older than your 20s, it’s not too late to start saving for retirement. The important thing is to get started, no matter what your age.
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The #1 Reason to Start Early: Compound Interest
If you start saving early, you could reap the benefits of compound interest.
CFP®, Brian Walsh says, “Time can either be your best friend or your worst enemy. If you start saving early, you make it a habit, and you start building now, time becomes your best friend because of compounded growth. If you delay — say 5, 10, 15 years to save — then time becomes your worst enemy because you don’t have enough time to make up for the money that you didn’t save.”
Here’s how compound interest works and why it can be so valuable: The money in a savings account, money market account, or CD (certificate of deposit) earns interest. That interest is added to the balance or principle in the account, and then interest is earned on the new higher amount.
Depending on the type of account you have, interest might accrue daily, weekly, monthly, quarterly, twice a year, or annually. The more frequently interest compounds on your savings, the greater the benefit for you.
Investments — including investments in retirement plans, such as an employee-sponsored 401(k) plan or a traditional or Roth IRA — likewise benefit from compounding returns. Over time, you can see returns on both the principal as well as the returns on your contributions. Essentially, your money can work for you and potentially grow through the years, just through the power of compound returns.
The sooner you start saving and investing, the more time compounding has to do its work.
💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.
Saving Early vs Saving Later
To understand the power of compound returns, consider this:
If you start investing $7,000 a year at age 25, by the time you reach age 67, you’d have a total of $2,129,704.66. However, if you waited until age 35 to start investing the same amount, and got the same annual return, you’d have $939,494.76.
| Age | Annual Return | Savings |
|---|---|---|
| 25 | 8% | $2,129,704.66 |
| 35 | 8% | $939,494.76 |
As you can see, starting in your 20s means you may save double the amount you would have if you waited until your 30s.
Starting Retirement Savings During Different Life Stages
Retirement is often considered the single biggest expense in many peoples’ lives. Think about it: You may be living for 20 or more years with no active income.
Plus, while your parents or grandparents likely had a pension plan that kicked off right at the age of 65, that may not be the case for many workers in younger generations. Instead, the 401(k) model of retirement that’s more common these days requires employees to do their own saving.
As you get started on your savings journey, do a quick assessment of your current financial situation and goals. Be sure to factor in such considerations as:
• Age you are now
• Age you’d like to retire
• Your income
• Your expenses
• Where you’d like to live after retirement (location and type of home)
• The kind of lifestyle you envision in retirement (hobbies, travel, etc.)
To see where you’re heading with your savings you could use a retirement savings calculator. But here are more basics on how to get started on your retirement savings strategy, at any age.
Starting in Your 20s
Starting to save for retirement in your 20s is something you’ll later be thanking yourself for.
As discussed, the earlier you start investing, the better off you’re likely to be. No matter how much or little you start with, having a longer time horizon till retirement means you’ll be able to handle the typical ups and downs of the markets.
Plus, the sooner you start saving, the more time you’ll be able to benefit from compound returns, as noted.
Start by setting a goal: At what age would you like to retire? Based on current life expectancy, how many years do you expect to be retired? What do you imagine your retirement lifestyle will look like, and what might that cost?
Then, create a budget, if you haven’t already. Document your income, expenses, and debt. Once you do that, determine how much you can save for retirement, and start saving that amount right now.
💡 Learn more: Savings for Retirement in Your 20s
Starting in Your 30s
If your 20s have come and gone and you haven’t started investing in your retirement, your 30s is the next-best time to start. While there may be other expenses competing for your budget right now — saving for a house, planning for kids or their college educations — the truth remains that the sooner you start retirement savings, the more time they’ll have to grow.
If you’re employed full-time, one easy way to start is to open an employer-sponsored retirement savings plan, like a 401(k). We’ll get into details on that below, but one benefit to note is that your savings will come out of your paycheck each month before you get taxed on that money. Not only does this automate retirement savings, but it means after a while you won’t even miss that part of your paycheck that you never really “had” to begin with. (And yes, Future You will thank you.)
💡 Learn more: Savings for Retirement in Your 30s
Starting in Your 40s
When it comes to how much you should have saved for retirement by 40, one general guideline is to have the equivalent of your two to three times your annual salary saved in retirement money.
Once you have high-interest debt (like debt from credit cards) paid off, and have a good chunk of emergency savings set aside, take a good look at your monthly budget and figure out how to reallocate some money to start building a retirement savings fund.
Not only will regular contributions get you on a good path to savings, but one-off sources of money (from a bonus, an inheritance, or the sale of a car or other big-ticket item) are another way to help catch up on retirement savings faster.
Starting in Your 50s
In your 50s, a good ballpark goal is to have six times your annual salary in your retirement savings by the end of the decade. But don’t panic if you’re not there yet — there are a few ways you can catch up.
Specifically, the government allows individuals aged 50 and older to make “catch-up contributions” to 401(k), traditional IRA, and Roth IRA plans. That’s an additional $7,500 in 401(k) savings, and an additional $1,000 in IRA savings for 2024 and 2025. (Note that in 2025, those aged 60 to 63 may contribute an additional $11,250, instead of $7,500.)
The opportunity is there, but only you can manage your budget to make it happen. Once you’ve earmarked regular contributions to a retirement savings account, make sure to review your asset allocation on your own or with a professional. A general rule of thumb is, the closer you get to retirement age, the larger the ratio of less risky investments (like bonds or bond funds) to more volatile ones (like stocks, mutual funds, and ETFs) you should have.
Starting in Your 60s
It’s never too late to start investing, especially if you’re still working and can contribute to an employer-sponsored retirement plan that may have matching contributions. If you’re contributing to a 401(k), or a Roth or traditional IRA, don’t forget about catch-up contributions (see the information above).
In general, when you’re this close to retirement it makes sense for your investments to be largely made up of bonds, cash, or cash equivalents. Having more fixed-income securities in your portfolio helps lower the odds of suffering losses as you get closer to your target retirement date.
💡 Learn more: Savings for Retirement in Your 60s
The Takeaway
Investing in retirement and wealth accounts is a great way to jump-start saving and investing for your golden years, whether you invest $10,000 or just $100 to get started.
The first step is to open an account or use the one that’s already open. You could also increase your contribution. If you’re opening an account, you may want to consider one without fees, to help maximize your bottom line.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
FAQ
Is 20 years enough to save for retirement?
It’s never too late to start investing for retirement. If you’re just starting in your 40s, consider contributing to an employer-sponsored plan if you can, so that you can take advantage of any employer matching contributions. In addition to regular bi-weekly or monthly contributions, make every effort to deposit any “windfall” lump sums (like a bonus, inheritance, or proceeds from the sale of a car or house) into a retirement savings vehicle in an effort to catch up faster.
Is 25 too late to start saving for retirement?
It’s not too late to start saving for retirement at 25. Take a look at your budget and determine the max you can contribute on a regular basis — whether through an employer-sponsored plan, an IRA, or a combination of them. Then start making contributions, and consider them as non-negotiable as rent, mortgage, or a utility bill.
Is 30 too old to start investing?
No age is too old to start investing for retirement, because the best time to start is today. The sooner you start investing, the more advantage you can take of compound returns, and potentially employer matching contributions if you open an employer-sponsored retirement plan.
Should I prioritize paying off debt over saving for retirement?
Whether you should prioritize paying off debt over saving for retirement depends on your personal situation and the type of debt you have. If your debt is the high-interest kind, such as credit card debt, for instance, it could make sense to pay off that debt first because the high interest is costing you extra money. The less you owe, the more you’ll be able to put into retirement savings.
And consider this: You may be able to pay off your debt and save simultaneously. For instance, if your employer offers a 401(k) with a match, enroll in the plan and contribute enough so that the employer match kicks in. Otherwise, you are essentially forfeiting free money. At the same time, put a dedicated amount each week or month to repaying your debt so that you continue to chip away at it. That way you will be reducing your debt and working toward saving for your retirement.
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