How to start preparing for retirement in your 20s

A young woman receives help from a financial advisor.

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It can be far too easy for adults in their 20s to overlook retirement altogether.

After all, it’s still decades away, with many other shorter-term goals — such as buying a home or paying off student debt — closer on the horizon.

About 66% of Gen Zers, or those between ages 18 and 25, say they’re not sure they’ll ever have enough money to be able to retire, according to the recent Prosperity Index Study by Intuit.

Yet, for people in their 20s, it’s a powerful time to get started on saving and investing for retirement. With the right moves now, you can harness the power of compound interest and make the most of the decades ahead to set yourself up for success.

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“Awareness is the key. Some people have the ‘head in the sand mentality’ for too long for a lot of their 20s,” said Sophia Bera Daigle, a certified financial planner and the founder of Gen Y Planning in Austin, Texas. She is also a member of the CNBC Financial Advisor Council.

Here are some moves to get started:

1. Make the most of your 401(k)

2. Open and invest in a Roth IRA

When you open and contribute to a Roth Individual Retirement Account, you don’t pay taxes on the dollars you put into the account, allowing your savings to grow tax-free for decades.

While they may have income limits and other drawbacks, it’s a powerful tool for people in their 20s.

As you begin your career, you will likely have a lower income, putting you in a lower tax bracket. Use this to your advantage and consider opening a Roth IRA, in which your tax payments will be low.

Funds in a Roth account can also be withdrawn at any time without penalties, making them useful for other goals or even for emergencies.

3. Build up emergency savings

It’s smart to have an emergency savings fund, especially as most emergencies can cost hundreds of dollars.

Before you really start paying down debt, get a handle on that emergency fund, said Williams. Building an emergency savings first can help you keep your retirement savings untouched should unexpected expenses arise.

You may want to have about six months of your spending needs in an emergency fund in case you lose your job, said Williams.

Look into products where you can earn more for your savings, said Daigle.

4. Invest with a long horizon in mind

You have four to five decades in your favor, Williams said. Use the markets for what they’re meant for and be fairly aggressive.

It can be strategic to allocate your assets in different investments, and your 20s is the time for you to take the most risk as an investor, such as focusing your portfolio on stocks.

If it seems daunting for you, you can stick to target date funds, which are the default investment vehicle for most employer-sponsored accounts.

5. Take advantage of your human capital

As someone who’s in their 20s, you have the highest amount of “human capital,” said Williams. Continue educating yourself and refining your skills during your 20s to increase your earnings potential, whether through graduate programs or certifications, Williams said.

“They have all the time. Increasing their earnings potential is one of the best retirement readiness things as well,” he said.

Boosting your income will help you keep up with your short-term goals while bulking your retirement savings.

Make yourself more marketable now in your 20s; that’s really going to pay on in your 40s and 50s, he added.

6. Get and stay out of debt

7. Live within your means

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