When to Start Saving for Retirement

February 25, 2026 · EPM Labs

Retirement feels abstract when you’re in your 20s or 30s. You’ve got rent to pay, maybe student loans, possibly a new baby on the way. Saving for something 30 or 40 years out? It barely registers.

But here’s the thing: the single most powerful factor in retirement savings isn’t how much you save — it’s when you start.

The Math That Changes Everything

Let’s say two people both want to retire at 65 with a comfortable nest egg.

Person A starts saving $200/month at age 25. By 65, assuming a 7% average annual return, they’ll have roughly $525,000 — from only $96,000 in total contributions.

Person B waits until 35 to start the same $200/month. By 65, they’ll have about $243,000 — from $72,000 in contributions.

Person A contributed just $24,000 more but ended up with more than double the final amount. That’s compound interest doing the heavy lifting. Every year you wait costs you exponentially.

“But I Can Barely Cover My Bills”

Fair. Not everyone can carve out $200 a month right now. But here’s what most people don’t realize: starting small still matters enormously.

Even $50 a month at age 25 grows to over $130,000 by 65. That’s real money — and it came from just $24,000 in contributions. The point isn’t to max out your 401(k) on day one. The point is to start.

Here are some ways to begin with almost nothing:

  • Employer match: If your company offers a 401(k) match, contribute at least enough to get the full match. It’s free money. Literally.
  • Auto-increase: Many plans let you auto-increase contributions by 1% each year. You won’t feel it, but it adds up fast.
  • Round-up apps: Tools like Acorns invest your spare change. It’s not a retirement plan, but it builds the habit.
  • IRA contributions: You can open a Roth IRA with as little as $1 at some brokerages. No employer required.

Which Account Should You Use?

This trips people up, but it doesn’t need to be complicated:

401(k) or 403(b): Offered through your employer. Contributions come out pre-tax (traditional) or post-tax (Roth). If your employer matches, this is always step one.

Roth IRA: You contribute after-tax dollars, but withdrawals in retirement are tax-free. Great if you expect to earn more later in life (most young people should).

Traditional IRA: Contributions may be tax-deductible now, but you’ll pay taxes on withdrawals. Better if you’re in a high tax bracket today.

The simple rule: Get your employer match first. Then fund a Roth IRA. Then go back and increase your 401(k). That covers most people.

Life Transitions That Derail Retirement Savings

Certain life changes tend to knock people off track:

Getting your first “real” job: Lifestyle inflation eats the raise before you save any of it. Set up automatic contributions before you adjust to the bigger paycheck.

Buying a home: The temptation to pause retirement contributions to fund a down payment is strong. Try to keep at least your employer match going — raiding your future self to buy a house is a trade-off worth thinking hard about.

Having a baby: Expenses jump, one income might drop, and retirement savings is often the first thing cut. Even dropping to $25/month is better than $0, because you maintain the habit.

Changing jobs: The average person changes jobs 12 times in their career. Each transition is a moment where old 401(k)s get forgotten, new ones don’t get set up, and momentum stalls. Roll over old accounts promptly and enroll in new plans immediately.

Divorce: Assets get split, budgets get tight, and long-term planning takes a back seat. This is actually one of the most important times to revisit your retirement plan.

The “I’ll Catch Up Later” Trap

People assume they’ll earn more later and save aggressively to compensate. Some do. Most don’t.

Life gets more expensive, not less. Kids, mortgages, aging parents, healthcare — the costs stack up. The window for easy saving is actually right now, when your expenses are (relatively) low and time is on your side.

There’s also a psychological component: saving is a habit. If you don’t build it early, it doesn’t magically appear at 40.

What If You’re Already Behind?

Don’t panic. You have options:

  1. Increase contributions aggressively — even 1-2% more per paycheck helps
  2. Catch-up contributions — after 50, the IRS allows extra contributions to 401(k)s and IRAs
  3. Delay retirement by a few years — working even 2-3 extra years dramatically changes the math
  4. Reduce expenses now — redirecting even $100/month makes a real difference over 15-20 years
  5. Avoid high-fee funds — a 1% fee difference can cost you hundreds of thousands over a career

The worst thing you can do is nothing. The second worst is panic-investing in high-risk bets to “catch up.” Steady, consistent contributions win the race.

A Simple Starting Plan

If you’re reading this and don’t have retirement savings set up yet, here’s your action list for this week:

  1. Check if your employer offers a 401(k) match. If yes, enroll and contribute enough to get the full match.
  2. Open a Roth IRA if you’re eligible (income limits apply). Fidelity, Schwab, and Vanguard all offer $0-minimum accounts.
  3. Set up automatic transfers — even $25/week. Make it invisible.
  4. Set a calendar reminder for 6 months from now to increase your contribution by 1%.

That’s it. No fancy strategy needed. Just start, automate, and let time do the work.

The Bottom Line

Retirement planning isn’t about having all the answers today. It’s about giving yourself options tomorrow. Every dollar you save in your 20s is worth roughly $7-10 at retirement. In your 30s, it’s worth $4-5. In your 40s, $2-3.

The best time to start was years ago. The second best time is right now.

Life transitions don’t have to derail your finances. Check out our financial calculators to model different savings scenarios, and explore our guides for practical advice on every major life change.

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