Posted On: May 28, 2025 by Prevail Bank in: Banking
Retirement may seem like a distant concept when you're in your 20s, but this is the best time to start laying the foundation for your future. The decisions you make today, no matter how small, can have a major impact on your financial stability decades from now. Whether you're fresh out of college or just getting established in your career, now is the time to begin planning for the life you want later.
Step 1: Visualize Your Future
While you don’t need a detailed plan yet, having a general vision of what you want from retirement helps shape your financial strategy. Ask yourself what kind of life you’d like to live when you’re older. Do you picture early retirement and global travel? Or a slower paced lifestyle close to family and community? Will you stay in Wisconsin or move elsewhere? Even a rough idea of your long-term lifestyle gives you something to aim for and helps you make more informed decisions today.
Step 2: Understand What Retirement Might Cost
Right now, your financial focus may be on student loans, rent, or saving for your first home. But retirement, even if it’s 40 years away, has its own costs to consider. A general rule is that you’ll need about 70 to 80 percent of your pre-retirement income to maintain your standard of living. Factor in long-term inflation and rising healthcare costs.
Also consider how Social Security fits into your future—it will likely still be around, but it shouldn't be the backbone of your retirement income. The more you can do to build your own savings now, the more freedom and security you’ll have later.
Step 3: Start Saving Early
The biggest advantage you have in your 20s is time. Thanks to compound interest, even small amounts saved now can grow significantly over the years.
If your employer offers a 401(k) plan, start contributing as soon as possible. Try to contribute at least enough to get the full employer match if one is offered. If a 401(k) isn’t an option, consider opening a Roth IRA. Even saving $50 to $100 a month makes a difference. Automating your contributions makes it easier to stay consistent.
Also focus on paying off high-interest debt, such as credit card balances. This frees up more money for saving and investing down the road.
Step 4: Learn the Basics of Investing
You don’t need to be an expert to begin investing - you just need to get started.
Researching the many options and talking with financial professionals will help you determine the right investing strategy for you.
Step 5: Know the Tax Perks of Starting Early
Wisconsin offers certain tax benefits for retirees that are worth understanding now. For example, Social Security benefits are not taxed at the state level. If you contribute to a Roth IRA, your qualified withdrawals in retirement will also be tax-free. These types of accounts can offer major benefits later, and the earlier you start, the more you gain.
Step 6: Review Your Progress Regularly
Your 20s will likely bring a lot of changes—new jobs, relationships, moves, and financial shifts. Make it a habit to check in with your retirement strategy at least once a year. Ask yourself whether you're saving enough, whether your goals have changed, and whether it’s time to increase your contributions. A quick annual review helps ensure you stay on track and adapt as life evolves.
Step 7: Don’t Be Afraid to Ask for Help
Retirement planning can seem overwhelming, especially when you’re just starting out. But you don’t have to figure everything out on your own. Talk to a financial advisor or visit your local bank to learn more about retirement accounts and investing. There are plenty of people who can help guide you in the right direction.
In Conclusion
Your 20s may feel like the beginning of your journey, but they’re also the best time to start planning for retirement. By setting goals, saving what you can, and building your investment knowledge, you’ll be setting yourself up for long-term success. Even small actions today can lead to major rewards tomorrow.
