Reflecting on National Save for Retirement Week, my co-workers and I have been thinking a lot about those close to or in retirement. However, we shouldn’t ignore the fact that our advice might actually be more helpful to folks at the beginning of the journey than those approaching their retirement destination. There are more of these folks than you may imagine; millennials have surpassed the population of baby boomers, according to the U.S. Census Bureau. Yet too often this is a generation forgotten. So, I asked one of my colleagues, Zoe Odenwalder, a 20-something millennial herself, to provide a few suggestions to make the trip to retirement a more relaxing one. Read Zoe’s unique insight below:

We are all guilty of FOMO (translation for nonmillennials: fear of missing out) at times: Am I missing out on a party? Meeting new people? Being part of an inside joke? It seems everywhere we look somebody else is doing something better, whether it’s on Instagram, Facebook, or Snapchat. Eventually, we realize that we’re likely not missing much. But, while we may not be missing out on Friday night’s party, we may be missing out on something seriously important: retirement planning.

When it comes to retirement planning we literally can’t even. I get it, retirement is far away, and why put a portion of your (maybe small) salary in an account that can’t be used for another 30 to 40 years? To that, I say “excuses.” Unfortunately, the number of financial obligations in our lives is probably only going to increase. Luckily, saving for retirement in your 20s doesn’t have to be hard or expensive (promise). Here are five ways to avoid missing out on saving for retirement in your 20s

1) YOCO (translation for nonmillennials: You only compound once)

As 20-somethings we may have smaller salaries, but we have a huge advantage: time. Time allows you to take advantage of compounding, the growth your original investment earns over time. For example, Michael and Kelly both put over $85,000 in their retirement accounts over the years, but Michael started saving at age 22 ($2,000 a year), while Kelly started at age 42 ($3,740 a year). Even though they both put in the same amount, Michael will have significantly more money than Kelly will ($375,015 versus $173,885) when they reach retirement at age 65 (assuming a 6% annual return).

This hypothetical example does not represent any particular investment. The final account balance does not reflect any taxes or penalties that may be due upon distribution. Withdrawals from a traditional IRA before age 59 1/2 are subject to a 10% federal penalty tax unless an exception applies.

The reason is because the earnings Michael sees early on grow on themselves as the years go on. Let your money work for you—YOCO.

2) Treat yo’ self (to your match)

While compounding isn’t quite free money, employer matches pretty much are. Employers are rewarding you for treating yourself! If only someone would match me for the clothes I buy. Even though retirement may not be as exciting, it’s the same logic. If your employer matches 50 cents for every dollar you contribute to your 401(k) up to 6% of your salary, that would equate to a 50% return on your investment. There’s no other investment that’ll offer that type of guaranteed return, especially not if the investment is clothes. In fact, many employers also allow you to sign up for automatic increases, which bump up the percentage of money you save each year by 1%–2%which you probably won’t even notice. So treat yo’ self!

3) You wanna be a millionaire (actually, you do)

A million dollars may seem like a lot, but it really isn’t when you’re considering retirement. If you decide to spend $40,000 a year for 25 years of retirement, you’ve already hit a million, and with life expectancy increasing, the likelihood that you’ll live 25 years in retirement is growing. But, don’t be scared of this number. Shockingly the amount of money you need to save to become a millionaire by the time you’re 65 isn’t much. Assuming you start saving at 22 and earn 6% interest, you only need to save $15 a day. 

Ways to save:

Latte: $3

Buying lunch: $10

ATM fee: $2

Vending machine: $1.50

Happy Hour: $5

The list goes on, but if you scrutinize your budget, there are plenty of ways to save an extra $15. Even if you can only save $5 a day you’ll still save nearly $400,000, and at $5 a day it will take you less than a year to save $1,000, the lowest minimum investment for a Vanguard IRA®.

4) Tackle the debt dilemma

You’re not alone; many young people, including me, have some form of debt, be it student loans, a car loan, or credit card debt. However, these expenses don’t need to get in the way of funding your retirement. As a rule of thumb, always make sure to save up to your employer match—otherwise you’ll be leaving money on the table. Once you save up to the match, continue to pay down your debt, prioritizing items with the highest interest rates. While it may seem tempting to put off saving for retirement until you’re debt-free, remember the example of Michael and Kelly. It’s best to do a little of both rather than to skip saving for retirement altogether.

5) The power of Roth

Because we have time on our sides, as 20-somethings, we can truly benefit from the power of a Roth IRA. With a Roth IRA, you pay taxes on your money before it goes into the account, versus a traditional IRA where you pay taxes on your money when you withdraw it. This means you’re likely paying less tax on the contributions now than you will when you retire because you’re likely to move into a higher tax bracket over your lifetime. In addition, although I don’t encourage it, money contributed to a Roth IRA can be withdrawn tax-free (principal only)! So, if you decide you’d like to go to grad school or buy a house, you could use the money you saved in your Roth to help out. You could consider your Roth as an alternate savings account, which is especially helpful if you’re having a hard time starting an emergency savings fund, but ultimately the goal is retirement.

Next time your friends mention retirement, remember, you literally can even. Stop having FOMO, stay in, and save some money…YOCO.


Einstein said, “Compound interest is the eighth wonder of the world…,” and having Einstein agree with you is always a good start. However, you don’t have to be Einstein to set yourself up for a successful retirement if you are mindful of these simple realities: 1) Start saving early, 2) be cautious of your spending, 3) always take your match, 4) be smart about paying down debt, and 5) use a Roth to your advantage.

I wish that someone had passed along this advice to me when I was Zoe’s age. Although, if anyone asks, that wasn’t that long ago!

Editor’s note: Zoe Odenwalder is a junior economist with Vanguard Investment Strategy Group.