Retirement might seem like a distant concern if you’re a Millennial or part of Gen Z, especially when you’re just getting your career off the ground or juggling student loans. But here’s the truth: the earlier you start planning for retirement, the more freedom you’ll enjoy later in life. Building a financial foundation now gives you options—whether that’s retiring early, switching careers, starting a business, or simply not stressing about money in your 60s.
If you’ve ever wondered how to begin planning for retirement, this guide will walk you through the basics, without jargon or unrealistic advice. It’s not about sacrificing everything today for a better tomorrow; it’s about finding balance and making smart moves early.
Why Retirement Planning Matters Now
Let’s be honest—retirement sometimes seems like forever away. But consider this: if you’re in your 20s or 30s, you have the most powerful tool on your side, time.
Thanks to compound interest, even small contributions now can snowball into serious savings over decades. For example, investing just $100 a month starting at age 25 could grow to over $250,000 by retirement age, assuming a 7% average annual return. Wait until 35, and that number drops by nearly half.
The Cost of Waiting
The biggest mistake younger generations can make is assuming they’ll “figure it out later.” Life gets busier, expenses grow, and opportunities to invest early start to slip away. Early planning isn’t just smart, it’s crucial.
Step 1: Know What Retirement Really Means
For past generations, retirement often meant stopping work completely around age 65 and living off a pension or Social Security. But that model is changing.
For Millennials and Gen Z, retirement could look very different:
- Retiring early and living lean (FIRE movement)
- Working part-time or freelancing into later years
- Taking mini-retirements throughout life
- Building enough assets to live comfortably without relying on government support
The key is this: you define what retirement means for you, but you can’t afford to ignore it altogether.
Step 2: Set a Target (Even if It Changes Later)
You don’t need to have every detail figured out right away. But it helps to start with a loose target. Ask yourself:
- When would I like to stop working full-time?
- What kind of lifestyle do I want in retirement?
- Where do I want to live?
Once you have an idea, you can work backward. For example, if you want to retire at 60 with $1 million saved, and you’re currently 30, you’ll need to save and invest around $850 a month, assuming a 7% return. That might sound steep, but it becomes more manageable the earlier you start.
Step 3: Start with Your 401(k) or Employer Retirement Plan
If you’re working for a company that offers a 401(k), that’s often the easiest place to start. Especially if they offer a match, which is essentially free money. Always try to contribute enough to get the full match.
Tips for Using Your 401(k) Wisely:
- Aim to contribute at least 10-15% of your income, including the match
- Choose low-cost index funds if you’re unsure what to invest in
- Don’t panic when the market dips—stay invested for the long term
If you don’t have a 401(k), consider opening an IRA (Individual Retirement Account). A Roth IRA is great for younger investors because you pay taxes now, but withdrawals in retirement are tax-free.
Step 4: Automate Your Savings
One of the best habits you can form early is to automate your savings and investments. Set up automatic transfers from your checking account to your retirement accounts or brokerage accounts. This removes the temptation to spend the money elsewhere and ensures consistency.
Even if it’s only $50 a month to start, it’s something. You can always increase the amount as your income grows.
Step 5: Learn the Basics of Investing
Retirement savings shouldn’t just sit in a bank account. To grow your money, you need to invest it.
You don’t need to be a stock-picking guru. Most people are better off with a simple, diversified portfolio using index funds or ETFs. These funds track the overall market and offer low fees.
Consider a mix of:
- Stocks (for growth)
- Bonds (for stability)
- Cash or short-term investments (for liquidity)
If you’re just starting out and feel overwhelmed, consider a target-date fund, these adjust automatically as you get closer to retirement.
Step 6: Tackle Debt Strategically
It’s hard to think about retirement when you’re buried in debt. But not all debt is created equal.
Focus first on high-interest debt, like credit cards. Then work toward paying off student loans, while still trying to save for retirement, even if it’s a small amount. The goal is to avoid pausing retirement savings entirely, as every year counts.
Step 7: Build Other Assets
Retirement isn’t just about a 401(k). Many people supplement their retirement income with:
- Real estate investments
- Side businesses
- Brokerage accounts for taxable investing
- Passive income streams
Building multiple income sources gives you more flexibility and resilience in the long run. It also means you’re not fully dependent on traditional retirement accounts.
Step 8: Check In Annually
Once you have a plan in place, review it once a year. Life changes, such as new jobs, moving, marriage, kids, and so should your financial plan. Check your progress, adjust contributions, and rebalance your investments as needed.
There are also great tools and apps (like Empower, Mint, or YNAB) to help you track your net worth and retirement projections.
For Millennials and Gen Z, retirement isn’t about reaching a magic age—it’s about having the freedom to choose how you spend your time. Whether that’s traveling the world, pursuing passion projects, or just relaxing without financial stress, it all starts with early planning.
It’s okay if you’re not perfect. What matters is getting started. The sooner you begin, even with small, consistent steps, the more empowered your future self will be.