Saving for retirement in your 20s and 30s? Your future self will thank you.

Halsey Schreier

March 13, 2023

Beginning the retirement planning process in the early days of your career can set you up for a much more comfortable future.

For many people in their early careers, saving for retirement is low on the list of priorities. It can be tough to set aside money when there are more pressing bills to pay, such as student loan debt or childcare. People in their 20s and 30s are often working up to their full earning potential, making it difficult to save money for a life event that won’t happen for decades.

Still, beginning the retirement planning process in the early days of your career can set you up for a much more comfortable future. People who begin thinking about and saving for retirement in their 20s and 30s generally save much more than those who wait until their 40s or 50s to get started. For example, consider a 25-year-old and 45-year-old who both invest $500 each month. Assuming a 4% return, the 25-year-old will have roughly $629,000 by the time they reach full retirement age of 67. The 45-year-old, however, will have about $205,000.*

The tricky part for all savers is taking care of their future selves while being mindful of current cash flow. Here are five ways people in their 20s and 30s can start planning and saving for retirement while still building their careers and balancing current lifestyle needs.

#1. Choose your retirement “bucket” wisely.
There are typically two types of retirement accounts: tax-deferred and post-tax. Tax-deferred retirement accounts include employer-sponsored plans, such as a 401(k) or 403(b), and traditional individual retirement accounts (IRAs). Contributions to these accounts aren’t taxed; instead, you pay taxes when you take distributions from the accounts. Taxes are calculated based on your tax bracket at the time of distribution.

In contrast, post-tax accounts, such as Roth 401(k)s and Roth IRAs, are funded with post-tax money, meaning you’ve already paid taxes on the contributed funds before making the contribution. When you take money out of the account in retirement, you don’t pay taxes on those distributions.

It might be beneficial to choose post-tax savings options in your early career, when you’re making less money (and are therefore in a lower tax bracket). Some employer-sponsored plans offer Roth options, allowing you to save money in your workplace retirement account that can be distributed tax-free in retirement. Additionally, the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 expanded the ability for employers to make matching contributions to employees’ Roth 401(k)s. However, keep in mind that you will pay taxes on employer contributions to a Roth 401(k) in the tax year in which they are made.

#2. Get your full retirement match.
Speaking of employer plans, if you have a 401(k), 403(b) or Thrift Savings Plan with an employer match, consider deferring at least enough money to get the full match every year. For example, let’s say your annual salary is $50,000. If your employer matches up to 4% of every dollar you contribute to your plan (or $2,000 yearly), you’ll need to contribute about $167 every month to get the full match. If you contribute less than that, you could leave money on the table.

#3. Give your future self a raise.
While you want to make sure you contribute at least enough to maximize the employer match, you can contribute more than the employer match to your workplace plan. One way to give your future self a raise in retirement is to increase how much of your annual salary you contribute each time you get a raise during your working years. It doesn’t have to be a big bump; increasing your contribution amount by just 1% each year can make a big difference in your retirement savings. By the time you reach your higher-earning years, you’ll be putting away a significant amount of money annually.

This “yearly raise” approach also works with contributions to self-employed retirement plans, such as a Simplified Employee Pension plan or Savings Incentive Match Plan for Employees IRA, as well as traditional or Roth IRAs. However, keep in mind that annual contribution limits apply to both traditional and Roth retirement accounts. Your financial professional can help you determine how much you should be contributing to each account without going over the limit.

#4. Diversify your investments.
Diversification of investments and proper asset allocation of your retirement assets is extremely important for a successful retirement. Most employer-sponsored plans, as well as traditional and Roth IRAs, offer a range of investing options. You can select from these options when setting up your retirement account and make adjustments as market environments shift or your goals change.

Some retirement accounts offer target-date funds, which are built to be more growth-oriented in the early years of your career and grow more conservative as you approach retirement. For example, let’s say your target date is 2053. Today, your target-date fund might include a heavy mix of large-cap, small-cap and global equities, as well as emerging markets. Over the years, the fund might shift to include more fixed-income options, such as bond funds.

Selecting investment options for your retirement accounts can be overwhelming. A financial advisor can help you identify investments to help you meet your goals. You can work with an advisor of your choosing, or your employer may work with an advisor who is familiar with the ins and outs of your workplace plan.

#5. Take advantage of other financial opportunities from your employer.
Paying attention to other areas of your financial life while in your 20s and 30s can also make a big difference for your (and your family’s) future. If your employer offers life insurance as an additional benefit, you can sign up to get coverage and more benefits for your loved ones. Using a Health Savings Account or a childcare or healthcare Flexible Spending Account can reduce how much you pay in taxes, both now and in retirement.

Those who have had to choose between repaying student loans and saving for retirement have been helped by SECURE 2.0. Starting in 2024, employers can make matching contributions to an employee’s retirement plan based on qualified student loan payments made by the employee. If your employer offers this, you may no longer have to choose between taking care of your current and future self—now you can do both.

By starting early, people in their 20s and 30s can create a more comfortable future for themselves. It starts by taking small actions. If you can’t put away enough to get the employer match on your workplace plan, start with a smaller amount and work up. The earlier you get started with saving for retirement, the better your chances of being able to realize your desired lifestyle in your later years.

Wherever you are in your journey to retirement, creating your ideal retirement lifestyle starts by working with a trusted financial partner. From investing and saving to future income and legacy planning, CIBC Private Wealth works with retirement savers of all ages and backgrounds. Visit our Private Wealth page to learn more.


Halsey Schreier is a senior wealth strategist for CIBC Private Wealth, US, with more than 10 years of industry experience. In this role, he works closely with high net worth clients in New York, the Mid-Atlantic and the Southeast to provide integrated wealth management services, including comprehensive estate and financial planning solutions, multi-generational legacy planning and fiduciary administration for trusts and probate estates.


*Calculated using the Compound Interest Calculator at Rate of return shown for illustrative purposes only and should not be construed as a guarantee of a particular rate of return.