Retirement is meant to be a welcome change of pace from the years of hard work we put in. But increasing financial strains are forcing a lot of people back into the workforce.

Generally, you can shield yourself from these concerns by saving for retirement as early as possible. Building that nest egg early in life will allow interest to compound and your investments to fully mature.

Let’s discuss the benefits of being proactive with your retirement, including tips to make up for lost ground and the best account to help you start saving.

When you invest in tax liens, earnings come from the interest applied to the lien

The Benefits of Saving Up for Retirement in Your 20s

When you are in your 20s, retirement may seem like the last thing you worry about. After all, retirement age is generally considered to be in your 60s. But even making modest contributions to a retirement plan in your 20s can have a significant, positive effect on your ability to not only retire when the time comes but to do so in a way that reflects your goals and ambitions.

The primary reason to consider retirement savings in your 20s is that for many of those young individuals entering that decade, expenses like mortgage payments and childcare costs have not yet come into play. That means you can focus on setting aside some extra cash without worrying about how it will affect other important budget items you may have five or ten years later.


Another reason that saving in your 20s is so beneficial is that you can take advantage of compound interest. That means even the modest contributions you make in your 20s will earn interest, and those earnings will also be subject to interest growth.

Finally, inflation, as we have seen, is a real thing that can impact your ability to afford life’s expenses both now and in the future. An early start to retirement can give you a head start and be better prepared for inflation events that may take place over the next 40 years.

Tips to Start Saving for Retirement

Not sure where to start? These tops can get you on the right track.

Start Budgeting

Few of us really enjoy taking a good, hard, and sometimes uncomfortable look at our income and expenditures. Still, it’s an important way to see how you’re spending your money, where you can make cuts, and how much you can realistically afford to put toward retirement.

Once you can start budgeting, you can start saving, and then you can start investing.

Move Savings to a Retirement Account

Take a look at your savings and evaluate how much of that you want on hand as a safety net and how much you’re willing or able to part with for the short term. Moving a portion of your savings into a retirement account can jump-start your efforts to reach a reasonable retirement goal.

Start As Early as Possible

Don’t wait until you find a position that offers a 401(k) or other type of employer-sponsored retirement plan. Take the initiative to get started on your own with a Traditional IRA, Roth IRA, or self-directed IRA. There are no age requirements to open an IRA — you just need an earned income. If you’re lucky enough to land a job with an employer that offers a retirement package, don’t think that’s the end of the road. Consider opening a Self-Directed IRA account to build wealth.

Put Your Money to Work

You can easily opt into a retirement account, set your contributions, and forget it. But playing an active role in your retirement efforts can pay off. If you have reasonable financial knowledge, consider actively participating in decisions about investing your money.

You can also consider a self-directed IRA, which lets you use your retirement funds to invest in things like real estate, promissory notes, precious metals, and other commodities.

Investing in these things often requires due diligence and a thorough understanding of risks and opportunities. Still, many of the assets available through an SDIRA have the potential for higher earnings. And some investments, like a rental property purchased through your SDIRA, can help you secure passive investments that regularly return income to your retirement account.

How to Catch Up for Retirement Later in Life

What if you’re well past your 20s or even 30s and just getting started? Is it too late to catch up? Though, it may not be as easy as it would have been if you started when you were younger, it’s still possible and important to do so. Here are some tips to help you reach your goals in a limited time frame.

  • Leverage the tax benefits of a retirement account: Have access to an employer-sponsored account? Enroll in it, and if your employer matches your contributions, contribute up to the matching limit to accelerate your savings.
  • Maximize catch-up contributions: Several retirement accounts have increased limits for individuals who are 50 years or older. For instance, the IRS-set contribution limit for Traditional and Roth IRAs for 2023 is $6,500, but if you’re 50 years or older, you can contribute an additional $1,000 annually.
  • Consolidate retirement accounts: Over time, you may have had a 401(k) here or an IRA here, and though they still can help you meet your retirement goals as separate entities, combining them can reduce fees charged by each custodian. And, if you decide that an SDIRA is the right option for you, consolidating those accounts can give you more investing power than they would on their own.
  • Invest in compound interest: Compound interest is the interest you earn on interest, and it can make a huge difference in the speed at which your retirement account grows. Multiple assets allow you to capitalize on this concept. Dividend stocks, real estate investment trusts (REITs), money market accounts, and bond funds are all worth considering as you grow your portfolio.

While we’ve talked a lot about the importance of retirement accounts, some will be better for your financial situation than others. Let’s explore six types of retirement accounts designed for people of all financial backgrounds.

Types of Retirement Accounts

Traditional IRA

A Traditional IRA is a retirement account that is funded with pre-tax dollars. The account grows tax-deferred, and you pay income taxes on qualified withdrawals. You can take penalty-free withdrawals from your IRA once you reach age 59 ½.

Before that, withdrawals will be subject to both income tax and a penalty. Once you reach the age of 73, you must take what is known as Required Minimum Distributions (RMDs)–essentially mandating that you withdraw money from your account or face a tax penalty.

  • Eligibility: You (or your spouse, if filing jointly) must have an earned income to be eligible for an IRA
  • Contribution limits*: $6,500 ($7,500 if you’re 50 or older) annually.
  • Tax deduction eligibility: Contributions may be deductible, but if and how much you can deduct depends on your income and whether you or your spouse contributes to a workplace retirement account.

Roth IRA

A Roth IRA is a retirement account funded with after-tax dollars, and like a Traditional IRA, funds grow tax-free while in the account. Qualified withdrawals are not taxed. And, unlike a Traditional IRA, you can make penalty-free withdrawals on contributions before the age of 59 ½. However, early withdrawals from earnings are taxed.

Roth IRA rules do not require the account holder to take RMDs while they are alive, though a beneficiary typically will need to take RMDs.

  • Eligibility: You (or your spouse, if filing jointly) must have an earned income to be eligible for an IRA.
  • Contribution limits*: $6,500 ($7,500 if you’re 50 or older) annually, with additional restrictions based on your income and tax filing status. (See Guide to Roth IRA for income-based details)
  • Tax deductible eligibility: Roth IRA contributions are not deductible.

Self-Directed IRA

Self-directed IRAs (SDIRAs) are individual retirement accounts that allow you to invest traditional assets, like stocks, bonds, and CDs, as well as non-traditional assets, like real estate, promissory notes, tax liens, and cryptocurrency. SDIRAs can be structured as Traditional or Roth accounts, and the rules, regulations, and tax benefits will depend on the type of account you use.

For instance, a Traditional SDIRA is funded with pre-tax dollars, and contributions may be deductible, whereas a Roth SDIRA is funded with after-tax dollars, and contributions are not deductible.

  • Eligibility: You (or your spouse, if filing jointly) must have an earned income to be eligible for an IRA.
  • Contribution limits*: $6,500 ($7,500 if you’re 50 or older) annually, with Roth SDIRAs subject to additional income-based limits.
  • Tax deductible eligibility: Traditional SDIRA contributions may be deductible, but Roth IRA contributions are not.


A 401(k) plan is a retirement account sponsored by your employer. If you opt into a 401(k), you can defer a portion of your pre-tax, earned income (through that employer) to the account. The account will grow tax-free until retirement, upon which you will pay taxes based on your current income bracket.

In most cases, early withdrawals-—or those before the age of 59 ½—are subject to a penalty, though there may be an exception if you retire or lose your job at age 55, also known as the Rule of 55.

It’s also important to note that even though most 401(k)s are structured as tax-deferred retirement accounts, Roth options exist. Like Roth IRAs, Roth 401(k)s are funded with after-tax dollars, and qualified withdrawals are tax-free.

  • Eligibility: Vary by the employer.
  • Contribution limits: Employees can contribute up to $22,500 annually.
  • Tax deduction eligibility: You cannot deduct 401(k) contributions, though they can reduce your tax liability.


Savings Incentive Match Plan for Employees (SIMPLE) IRAs allow employers to set up and contribute to employee IRAs. Employees can also make contributions to their employer-sponsored SIMPLE IRA.

  • Eligibility: To be eligible for a SIMPLE IRA, employees must earn at least $5,000 annually and be employed by a business that offers this specific plan.
  • Contribution limits*: $15,000 ($19,000 if you’re 50 or older).
  • Tax deduction eligibility: Employee contributions to a SIMPLE IRA are not deductible.


A Simplified Employee Pension Plan (SEP) is a tax-deferred IRA that is designed for self-employed individuals, gig workers, freelancers, and small business owners. Business owners can also choose to open and fund this type of IRA for their employees, though, unlike a SIMPLE IRA, employees cannot contribute to this type of IRA.

  • Eligibility: Any business owner or individual with freelance income can open a SEP IRA. However, if an employer opens a SEP IRA for themselves and hires employees, they must contribute to the account.
  • Contribution limit*: Lesser of $66,000 or 25% of compensation.
  • Tax deduction eligibility: Employees covered under an employer SEP cannot deduct the employer’s contributions. Employers can deduct the lesser of their contributions or 25% of compensation.

*Note that contribution limits can change annually, so always check the latest IRS guidance.

Whether you’re in your 20s and retirement seems a lifetime away, or this new phase of life is creeping up faster than you anticipated, saving for retirement is one of the most important financial practices you need to engage in.

If possible, start young—in your 20s if possible. Doing so will allow you to leverage years of compound interest and set yourself up for the retirement you envisioned. If you’re worried that you got a late start or aren’t anywhere near where you should be, there’s a great opportunity. Maximizing your contributions, taking advantage of catch-up contributions, and including compound investments in your portfolio can help you increase your wealth and get back on track.

If you’re unsure where to start, consider speaking with a financial advisor who can help. They can examine your current assets and future goals and determine a reasonable path forward.


What age is too late to start saving for retirement?

In most cases, it’s never too late to start saving for retirement. Even though you may not have the balance of your dreams, every bit saved can help you find financial security in your senior years. However, remember that some accounts won’t be as conducive to saving at an advanced age. Traditional IRAs, for example, require account holders to take minimum distributions at the age of 73.

Are there retirement accounts available for children?

Yes, there are ways to start a retirement account for your children. Typically, you must be 18 years old to open an account independently, but you can open a custodial Roth IRA for a child as long as they have an earned income. Earned income can come from a part-time job they have or self-employment opportunities, such as babysitting or dog walking.

When can you start withdrawing from a retirement account?

In most cases, you can start withdrawing from your retirement at age 59 ½, though rules can vary by account type and financial circumstances. Most notably, if you have a Roth IRA, you can withdraw from contributions at any time as long as the account has been open for five or more years.