6 Ways to Prepare for Your Retirement in Your 20s and 30s

How often have you caught yourself daydreaming about sailing around the world, retreating to the woods, or just sleeping in a little later than you're used to?

You're not alone. Most Americans think about retirement pretty regularly, but only half are actively preparing for it.

That's because doing the math can be a bit intimidating. But what if we told you that you could start preparing for retirement now—in your 20s and 30s—and it won't require major sacrifices or penny-pinching?

“Saving for retirement isn't something you should wait to do,” says Chad Waddoups, vice president of wealth management and business services at Mountain America Credit Union. “Thanks to compound interest, the sooner you start, the quicker your savings will build. That means a timely retirement can be well within your reach.”

Even if you are at the beginning of your career instead of the end, retirement is closer than you think. Truly, with a little bit of planning and some willpower, you will be well on your way to a comfortable post-career lifestyle. Here are six ways to prepare for retirement in your 20s and 30s.

1. Create a budget—and pay yourself first

   If you don't have a budget, now is the time to start!

   The quickest way to set up a budget is to take your monthly income and subtract all of your monthly expenses. If you're coming up with a negative number, it’s time to start cutting costs. Look at your streaming expenses, food delivery habits and other areas where your spending would be considered more of a want than a need.

    

   PRO TIP: A retirement calculator can help you set some tangible goals, which makes the process of budgeting a little more exciting. It’s always a boost to keep your why in mind!

    

   Once you're back in the black, determine how much you can afford to start saving and where you want to put that money. Adding to your savings accounts is like paying yourself—it's a crucial step in your budgeting plan and should be treated with the same diligence as your other bills.

    

2. Choose the right retirement account

   Roth IRAs, 401(k)s, high-yield savings accounts—where do you start?

    

   The simplest way to maximize your retirement savings is to enroll in your employer's 401(k) match program. If your employer matches 5%, for example, you can contribute 5% of your income to your 401(k) and you’ll technically be saving 10%! This is one of those rare, free money situations, and you should definitely take advantage of it. It also important to be aware that many companies may require employees to stay at the company for a certain period of time to be fully vested in the amount they match.

    

   If this isn't an option for you, a Roth IRA is another good way to save. With this type of account, you contribute already-taxed income and deduct it tax-free after a certain amount of time.

    

   If you need more time to figure out which option is right for you, consider opening a high-yield savings account. Your savings can grow quickly, and you don't need to worry about when you can or can't withdraw.

    

3. Pay off credit card debt

   Debt is a major obstacle to retirement. Don't let your current credit card balance prevent you from achieving your future life goals.

    

   As you build and adjust your budget, focus on how to reduce debt in a timely manner. Interest fees rack up quickly, so start by tackling the card with the highest interest rate—put as much money here as you can and pay the minimum payment on all other cards. Once this card is paid off, move to the card with the next highest interest rate, and so on.

    

   Once you hit a zero balance across the board, revisit your budget and focus on earning rewards. Decide if you can put a few regular expenses on a credit card to help you earn rewards. The key is to have a plan that empowers you to pay off those expenses in full each month.

    

   Building credit is always a good financial move, so don't feel like you need to cut up any of your cards and throw them away—just use them wisely and within your means. This may take some practice—use one credit card to start and pay it off in full every month. When you are comfortable with that, add another one.

    

4. Consider an additional income

   If you're looking for a way to boost your savings quickly, consider an alternate income stream.

    

   Some people like to invest and create passive income. If this is something you're interested in, speak with a financial advisor about which investments make sense for you and your goals.

    

   The side gig is another lucrative source of income for nearly half of all American workers. Whether it's writing, creating art, baking or driving for a rideshare company, it could be a big boost to your savings goals.

    

5. Set up an emergency fund

   One of the most important things you can do when it comes to a successful retirement is to protect the money you've set aside. It's your money and you worked hard for it—you don't want an unexpected expense to threaten those savings.

    

   This is where an emergency fund comes in handy.

    

   Put a little bit of money aside each month. It doesn’t have to be a grand amount—start with whatever you can afford, even if it’s just $20 or $50 per paycheck. Your first goal is to save enough to cover all your insurance deductibles. This will put you in a better position to handle an automotive, medical or home emergency without emptying your Roth IRA, 401(k) or other retirement account. From there, make it your goal to save three to six months’ worth of expenses.

    

6. Increase your savings regularly

   Finally, it's important that your savings habits evolve with you. If you're starting to plan your retirement in your 20s, your savings goals will likely start out pretty small. And that's ok! An entry-level salary can only allow for so much wiggle room, right?

    

   As you move up the ladder, keep increasing the amount you set aside for retirement each month. A good rule of thumb is to increase your contribution each time you get a raise.

    

This may sound like a lot! But, if you set realistic goals and stick to them, you'll be surprised at how fast things get moving.

Your retirement should be something to look forward to, not worry about. Take these steps now to get set up for success later in life. If you're struggling or still don't know where to start, speak to a financial planner. They'll be able to help you get started and create a plan to keep you on track.