Retirement Investing In Your Twenties

Someone in their twenties investing for retirement has one asset no one else has: forty years of compounding time. The strategy that maximizes this asset is not complicated.



The first move is to capture any employer 401(k) match. This is free money, often equal to three to six percent of salary. Not contributing enough to get the full match is one of the most costly mistakes at this stage.



The second move is to open a Roth IRA and contribute at least something monthly, ideally the maximum. Roth contributions in low-income years are typically the best tax deal a young investor gets.



The third move is to invest heavily in equity. A twenty-something's portfolio can reasonably be ninety to one hundred percent stocks. Bond exposure at this stage sacrifices long-term returns for volatility protection that time already provides.



The fourth move is to automate everything. Monthly transfers, automatic buys of index funds, annual increase built into the plan. Twenty-year-olds have busy lives. Money moves without ongoing decisions.



For a starter template with specific account types and fund suggestions, small money investing|investing with little money|beginner investing|low cost investing|starting to invest covers a complete setup.



The trap at this age is treating retirement as too distant to matter. The compounding math is unforgiving. Every year of delay costs more than the previous year, because you lose the year with the most compounding time remaining.