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Investing Retirement

Investing beyond the dusty, old 401(k) plan

  • 4-min read

The retirement savings game is slow, boring, and far from sexy. The phrase, “You’re young, just max out your 401(k)” is the main course on a tray of outdated advice.

Man saying, "We makin' schmoney."

The last thing that probably comes to mind as you start your career is saving for retirement. It’s surely less exciting than blowing your whole paycheck on a summer trip or a new wardrobe, but there’s a major upside to starting young. Time is on your side.

Experts recommend setting aside 10% to 15% of the income you earn in your 20s for retirement, if you can afford to. If that benchmark seems high, just save what you can. But don’t get hung up on how much you should be saving. Focus instead on where you put the money. 

Saving for retirement without a 401(k)

The last thing you want to do is pile all your savings into your bank account to earn 0.0002% interest (actually, it’s more like 0.02%). Inflation rose 7.5% over the last 12 months per the U.S. Bureau of Labor Statistics. In other words, every dollar you parked in a bank account lost 7.5% of its purchasing power. So unless you’re sitting on a couple of overvalued NFTs or have a daily Snapchat streak with Elon Musk, you’ll want to get familiar with the garden-variety investment options. 

The usual place to start is with your company plan, and that is typically a 401(k). What if there’s a waiting period to participate in your employer’s 401(k) plan, or your company doesn’t offer a 401(k) to begin with? Fear not — you have options.

Your options for saving for retirement in your 20s

There’s a sweet spot for contributing to retirement savings and spending part of your paycheck during your youthful years. Consider these three options for saving for retirement when you don’t have access to a 401(k).


Depending on how much income you’re bringing in annually, you can save as much as $6,000 total between a Roth IRA and a traditional IRA each year. If you file taxes as a single person, your modified adjusted gross income (MAGI) must be under $144,000 for tax year 2022 to contribute to a Roth IRA, and if you’re married and file jointly, your MAGI must be under $214,000 for tax year 2022.

The biggest advantage with these accounts is the tax treatment. With a Roth, your money grows tax-free, and with a traditional IRA your money grows tax-deferred. The amount you can lock away in IRAs may seem small, but the growth potential is phenomenal.


Many people don’t think of a health savings account (HSA) as a retirement tool, but it can be even more beneficial than an IRA or 401(k). It’s what they call a triple-tax advantage

In order to contribute to an HSA, you need to be enrolled in a high-deductible health plan (HDHP). You can contribute up to $3,650 of your pre-tax income in 2022 if you have individual health coverage or up to $7,300 if you have family health coverage.

In general, you can withdraw any amount to pay for medical expenses that insurance won’t cover, tax-free, at any time. After you hit a certain balance, as determined by your HSA bank, you can start investing your HSA savings like you would any other investment account. What better way to afford medical bills after your failed reenactment of a Jackass Forever skit? 

Taxable investment account

What’s also known as a brokerage account, these bad boys thrive with almost no strings attached. Unlike HSAs and IRAs, there’s no contribution limit and no penalties for withdrawals before retirement age. The downside: Fewer tax benefits.

The penalties on retirement-account withdrawals can scare people into saving nothing for their later years while they’re young, but saving a conservative amount in an account that’s locked away for later can help you avoid lifestyle creep and build wealth even faster. In general, it’s best to use taxable investment accounts for money that you’ll want to access before 59 ½.

Why it’s important to save for retirement in your 20s

“Remember that time is money.” It was Benjamin Franklin who said that. Fast forward more than 300 years, and the maxim holds true. It’s not about timing the market: It’s time in the market that counts. 

Consider a 25 year old and a 35 year old each saves $100 per month until age 65. Both get the historical average annual return of 7% per year on their investment portfolios. The 35 year old amasses $113,352 for retirement while the 25 year old amasses $239,562. The investor who started 10 years earlier socking away just $100 a month has more than double the nest egg of the investor who waited. Mind. Blown.

If we could just call up Netflix to apply their recommendation algorithm to investment plans, we’d all be set and they could lay off telling me to finish Ozark. Until then, you’ll have to weigh the options yourself, or with the help of a financial planner.