In your twenties, you have a lot of advantages that people who are older do not.
The most important advantage is time. You can start saving now and let the money compound over 40 or 50 years to create a retirement nest egg that will outstrip anything you could save later on in life.
This is not to say that you cannot save later on in life, but your twenties are the time when you are probably making less money.
The other advantage of saving during your twenties is that it gets you into the habit of saving and contributing to a retirement account.
It becomes easy to contribute each paycheck as it comes without even noticing what you are doing.
How Much You Should Contribute to Your 401k in Your Twenties
Now that you know the importance of saving for retirement, let’s talk about how much you should contribute to your 401k in your twenties.
The answer is: it depends.
But, a good rule of thumb is to try and save around 15% of your income each year. This includes what you are contributing from your paycheck and what your employer is matching.
So, if you are making $30k per year in 2019, that would be around $2300 a year in contributions or just under $200 a month.
This may seem like a lot to contribute when you have bills to pay and student loans looming over your head, but it is important to think about the future.
Contributing this much will help you get on track for a comfortable retirement. Plus, if you start early, you won’t even notice the money missing from your paycheck each month.
Saving for retirement may seem like a daunting task, but it is something that can be done with a little bit of effort. By contributing to your 401k in your twenties, you are taking the first steps to a secure future.
Remember, the most important thing is to start saving for retirement now, no matter how young you are! If you can manage to save around 15% of your income each
Why You Should Start Now
If you are in your twenties and haven’t started saving for retirement yet, now is the time to start.
As we mentioned above, it can be hard to think about retirement when you have so many other things on your mind. However, if you start now, the money will grow faster than if you wait until later in life.
What Else Can I Do to Save Money for Retirement
In addition to contributing to your 401k, there are other ways that you can save money for retirement.
One way is to open a Roth IRA. This account allows you to contribute after-tax dollars, which means that when you retire, you will be able to withdraw the money tax-free.