How to save for retirement, even if you’re broke and in your 20s

It’s never too early to start saving for the future.

Invest your money.

Stop buying coffee and avocado toast.

Young workers have likely heard at least one of these pearls from relatives, personal finance gurus, random motivational social media accounts, etc. But as any low-income 20-something can attest, what these warnings fail to acknowledge is that many workers literally can’t afford to rub two pennies together, let alone put the money from each paycheck into a 401(k).

That reality is especially real right now, and not just for young people. Research shows that most Americans live paycheck to paycheck due to historical inflation. Even among those making between $100,000 and $150,000, 29% reported the same, according to a LendingClub 2022 report. (For context, the US median household income was an estimated $71,186 for the same year).

The data also says that the younger you are, the less likely you are to win: A survey from Capital One found that the median salary for people ages 20 to 24 in the US is just $35,586. Rack up student debt, sky-high housing costs, and various other day-to-day expenses, and you’ll find that young people are barely getting by.

Ads for Money. We may receive compensation if you click on this ad.AdvertisementAds For Money Disclaimer

The best time to open an IRA is today.

There is no better time than the present to start preparing for your retirement. Click on your state now for more information.

HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRhode IslandRhode IslandConnecticutConnecticutBREASTMassachusettsMaineN.Hnew hampshireVermontVermontNYNew JerseyNew JerseyOFDelawareMarylandMarylandWest VirginiaOhioMichiganArizonaSnowfallUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington D.C.IdahoCaliforniaNorth DakotaWashingtonOregonMountainWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiarkansasTexas

To open an account

About what you’ve been told

Why does the financial advice industry so often attribute saving money to a matter of discipline and personal choice? According to Tori Dunlap, founder of financial and career platform HerFirst100k, that’s probably because emphasizing individual responsibility is so much easier than having an honest conversation about how pay discrimination and economic inequality limit the ability to save for individuals. young adults.

“Don’t even get me started on how ridiculous this industry is sometimes. There’s a lot of shame around money, period,” Dunlap told Money. “That shame is not only not helpful, it doesn’t help us make progress toward our goals.”

The other reason, he said, is that there is no universal advice when it comes to personal finances, but admitting that would spell undoing for those who promote themselves as all-knowing sages. Forces like policy change and a strong safety net of public benefits are needed to create a society where everyone has the ability to save for the future.

Your personal finances are only yours

You may already be on your retirement savings journey, but if you’re not, you can give yourself permission not to panic every time you read about the supposed misfortune that awaits you if you don’t have a Roth IRA. (You can also stop listening to TikToks from Famous talking about how easy it is to get rich investing).

“Personal finances are just that: personal,” Dunlap said. “I hate reading those articles where people say, ‘You can find a way to cut costs.’ People who live paycheck to paycheck don’t have a Netflix subscription. They’re not going out to eat all the time.”

Whether you’re already contributing to retirement accounts or are left with a handful of change at the end of the month, one small initial step you can take is to seek financial education that is tailored to your individual circumstances, Dunlap said.

No one but you can tell you which financial options are right for you. There is limitless information at our fingertips, as well as forums and communities like HerFirst100k to empower you and answer your questions. Just know that in finance, one size does not fit all.

“Find money advice that connects with you and doesn’t make you feel bad,” Dunlap joked.

Ads for Money. We may receive compensation if you click on this ad.AdvertisementAds For Money Disclaimer

Make your retirement plan work for you by investing in a Roth IRA

Roth IRAs allow you to save money for retirement while providing the flexibility that traditional retirement plans lack. Click below for more information.

To open an account

your future self

For those who really can’t save, break down monthly expenses and create financial priorities that benefit your quality of life to give you a better idea of ​​your overall financial well-being. That could mean putting aside $100 to pay down debt instead of retirement funds, or spending your last $20 on a gym membership and saving nothing when it comes to your physical health.

Regardless, Dunlap advises, set goals and develop healthy habits, even if you’re only saving a small amount each month. If you have to divert that small amount to pay bills, so be it. What matters is that you are thinking ahead and starting with goals that you will be better able to achieve as your income increases with age.

If you earn enough to save with each paycheck, Dunlap recommends these concrete ways to maximize your money: Set up automatic transfers, for credit card payments or regular contributions to a retirement savings account, so your wise new financial choices are very easy.

The most important thing, Dunlaps says, is to give yourself grace, shut out the noise, and focus your energy on figuring out what’s best for you.