"The best time to start saving for retirement was yesterday. The second best time is today."
Retirement feels impossibly far away when you're young — and that's exactly why starting now gives you such a massive advantage. The combination of tax-advantaged accounts (401k, Roth IRA), employer matching (literally free money), and compound growth means that a teenager who starts investing $50/month can retire a millionaire. The math is almost absurdly in your favor.
An employer-sponsored retirement account that lets you invest pre-tax dollars (traditional) or post-tax dollars (Roth). Contributions reduce your taxable income today.
If you earn $50,000 and contribute $5,000 to a traditional 401(k), you only pay income tax on $45,000.
Many employers match a percentage of your 401(k) contributions — free money added to your retirement savings. Always contribute enough to get the full match.
Employer matches 50% of contributions up to 6% of salary. You earn $50,000 and contribute 6% ($3,000) — employer adds $1,500 free.
An individual retirement account funded with after-tax dollars. Your investments grow tax-free and withdrawals in retirement are completely tax-free.
Invest $6,000 in a Roth IRA at age 16. By age 65 at 7% growth, it's worth ~$175,000 — and you owe zero taxes on any of it.
Investment accounts (401k, IRA, HSA) that receive special tax treatment — either reducing taxes now (traditional) or in retirement (Roth).
A regular brokerage account pays capital gains tax on profits. A Roth IRA pays zero tax on the same gains in retirement.
The sequence of financial priorities: emergency fund → 401(k) match → high-interest debt → Roth IRA → more 401(k) → taxable investing.
Before investing in stocks, make sure you're not paying 20% credit card interest — that "debt return" beats most investments.
If you invest just $6,000 per year (the Roth IRA maximum) starting at age 22 and earn a 7% average return, you'll have over $1.6 million by age 65. Starting at 32 instead? Only $800,000 — half as much, despite only missing 10 years.
| Framework | Competency Area |
|---|---|
| CFPB | Future financial planning |
| MyMoney Five | SAVE & INVEST |
| CEE Standards | Saving & Investing |
| FDIC Money Smart | Retirement planning basics |
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