When it comes to saving, the general rule is the earlier the better. The first time that young adults are often able to begin saving is in their early 20s, as they finish college and begin their first jobs. Many young adults, however, don’t understand the benefits of early investments in retirement savings. Those who do understand the benefits frequently don’t know where to start. Here are a few tips on how to start preparing for retirement early.

Savings Accounts

Beginning a savings account is one safe way to start preparing for retirement when you’re young. Although they receive minimal interest, placing money in a savings account is a secure investment where you can watch your money grow.

As you begin to build your savings account, you’ll also want to look at other investment options that offer more opportunities for interest.


Opening a 401K is one of the most popular ways to invest for your retirement. Any money that you contribute to a 401K is deducted prior to taxes being taken out, so a 401K is considered a tax-sheltered investment. This helps you make the most out of your investment and capitalize on the compound interest of the 401K.

IRA or Roth IRA

When contributing to an Individual Retirement Account, or IRA, you can qualify for a tax deduction that lowers your taxable income. You can continue to watch your money grow tax-free until you withdraw it for retirement. The money is taxed when you finally choose to withdraw it.

A Roth IRA works similarly to a traditional IRA, although the rules about when the contributions are taxed are different. Unlike a traditional IRA, a Roth IRA is taxed when you put contributions into the account. Then, when you’re ready to withdraw your savings, you don’t owe any taxes.

Talk With Your Employer

As you consider where and how to invest, it’s important to talk with your employer about any investment programs or retirement plans they offer. Many employers will offer an investment match up to a certain amount or percent of your paycheck. Others will use a specific pension plan or program. It’s important to know what your employer offers prior to investing.