How to Start Saving for Retirement in Your 20s and 30s

Thinking about retirement while you're still in the early stages of your career might seem premature, but time is your greatest ally in retirement planning. Those who begin pension building in their 20s and 30s gain a real advantage thanks to compound interest - the interest you earn on the interest you have already made. Starting in your 20s or 30s means your money has decades to compound and grow, potentially doubling multiple times before you retire. 

Setting the foundation 

Your 20s are ideal for establishing good financial habits. While juggling student loans, housing costs, and possibly starting a family, try to: 

• Prioritise clearing high-interest debt 
• Build an emergency fund covering 3-6 months of expenses 
• Start contributing to your pension, even modestly 
• Learn the basics of investing and risk profiles 

How to start saving for retirement in your 20s 

Enrol in your workplace pension 
Thanks to auto-enrolment legislation, your employer must contribute to your pension if you earn over £10,000 annually. This is essentially free money, so take full advantage by at least matching your employer's contributions. 

Pension rules and tax advantages make retirement savings especially powerful. Every £100 contributed to your pension typically costs only £80 as a basic rate taxpayer due to tax relief. 

Understand your pension options 
Beyond workplace schemes, consider: 

• Personal pensions - flexible options you can set up yourself 
• Self Invested Personal Pensions (SIPPs) - offering more investment control 
• Lifetime ISAs - available until age 40, with government bonuses of 25% on contributions up to £4,000 annually 

Start small, but start now 
Even modest contributions can grow significantly over time. If you start in your mid-twenties and invest the equivalent of a couple of weekend takeaways each month, compound interest can potentially turn your regular savings into a six-figure sum by retirement age.  

Increase contributions gradually 
Consider the ‘save more tomorrow’ approach by promising yourself you’ll increase your pension contributions whenever you get a pay rise or bonus. This clever strategy helps you save instead of spending the money you haven't been used to having, making it much easier to build your pension funds without feeling like you're giving anything up. 

What should a 30-year-old have saved for retirement? 

Many financial advisers often suggest having the equivalent of your annual salary saved by age 30. However, this isn't a hard-and-fast rule, especially given today's economic challenges. If you're not there yet, don't panic - focus on starting now rather than dwelling on past missed opportunities. While starting earlier provides more time for your money to grow, 30 is still relatively young in retirement planning terms.  

The best pension strategy is one you'll actually follow - start where you can, increase when possible, and stay consistent. Your future self will thank you.  

If you’d like some help in planning for retirement, get in touch today. 

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

You will incur a lifetime isa government withdrawal charge (currently 25%) if you transfer the funds to a different isa or withdraw the funds before age 60 and you may therefore get back less than you paid into a lifetime isa.

By saving in a lifetime isa instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:
(I) you may lose the benefit of contributions from your employer (if any) to that scheme; and
(ii) your current and future entitlement to means tested benefits (if any) may be affected.