Saving for your retirement – in your 20’s

When it comes to pensions, the earlier you can start saving, the better.

In an ideal world  you should start saving as soon as you get your first job.  This will give you the greatest chance of building a decent sized pension pot.

The later you leave it the more money you will need to save to get to the same point.

When should you start saving for pension?

You can start saving into a pension at any age, but ideally, the sooner the better. The earlier you start, the more chance you have of building a substantial retirement pot, as you’ve got more years in which to contribute and benefit from compound growth.

You can join your employers scheme, set up a pension scheme yourself or use the services of a qualified financial adviser to help you.

Here, we outline things to think about if you start saving in your 20s,  helping ensure you can have a comfortable financial future no matter when you start planning for it.

Saving for retirement in your 20s

If you’re thinking about starting to save for retirement in your 20s, well done – this is the ideal time to start.

With most savings plans the early you start the better and this is especially important when it comes to pension planning.

If you start early you may not need to invest as much as if you started later in life.

In addition to this, starting a pension in your 20s enables you to make more adventurous investment choices that could yield you better returns in the long term, and it might even give you the ability to take early retirement.

Life in your 20s

Whether you’ve just graduated from university and are about to start your first job or have been working since you left school, when you are in your early 20s you are still at the beginning of your career.

This means that you will probably be working in an entry-level position and, as such, earning less than your more established colleagues. As well as this, if you did go to university you will likely be paying off student debts.

This is traditionally the decade when you move away from home and start living independently for the first time, which means you will be learning how to manage your household finances and could even be trying to save for a house deposit.

Your 20s is also a time when you may want to socialise regularly and travel, or you may be planning to settle down and have children, in which case you could be thinking about saving money for a wedding.

With so many different things competing for your money, when starting to save for retirement at this age you must be realistic about the amount you will be able to save each month but remember that even a small saving will be beneficial in the long run.

How should I invest my money in my 20s?

Due to the amount of time your investments have to grow, your 20s is the ideal time to invest money for your retirement.

This is the time in your life that you can take higher risks due to the long period of time you are investing over. The higher the equity content in your funds the higher the potential returns.

It must be stated that any type of investment is risky and no matter where you invest there is always the possibility of losing money.

It is for this reason that you should consider any investments you make carefully and ideally get advice from an independent financial adviser before going ahead.

Pros and cons of starting a pension in your 20s

  • It’s the ideal time to start as you have decades in which to build a pension fund, giving you the best chance of accumulating a substantial pot.
  • You only need to save a small amount each month to see the benefits, particularly when compound growth is factored in.
  • If you’re aged 22+ and earn above the earnings threshold, you’ll be automatically enrolled into a workplace pension and will benefit from employer contributions.
  • If you’re in the early stages of your career you may not earn a substantial amount, which can make it difficult to prioritise long-term savings.
  • If you’re under 22 you won’t be automatically enrolled into a pension

For more information on how you can get started and the benefits of early pension planning please get in touch.


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